By Chung Ah-young
Jeong Soo-young, 40, recently purchased an apartment in Jeongneung-dong, northern Seoul, despite lingering uncertainty in the property market.
After renting an apartment for two years under the "jeonse" system, her landlord raised the required security deposit, and she couldn't afford to stay there on her income.
"When the lease was about to expire, my landlord said he was raising my deposit by 50 million won if I wanted to renew," she said. "So I decided on a home purchase."
She took out a mortgage to buy her current apartment, which measures 76 square meters, for 300 million won.
"There was no difference whether I increased my deposit or took out a mortgage to buy a home because the price gap is not much these days," she said.
Jeong is one of many "jeonse" tenants whose life has been affected by relentlessly soaring rents. The jeonse system is a financing tool unique to Korea in which the tenant pays the landlord a large deposit when a contract begins. The landlord returns the money with no interest when the contract expires, typically after two years.
Low- and middle-income families had long relied on the jeonse system because home ownership was out of reach for many, and jeonse was seen as a more affordable alternative.
However, the nation's real estate market has been in a slump since 2008, discouraging speculation and bringing the upward spiral of home prices to a halt. This has had the effect of pushing up jeonse prices.
According to Kookmin Bank's housing price index in September, the average jeonse price for apartments in Seoul has hit a record high of 310 million won.
The difference between the cost of buying a home and renting one stood at 64.6 percent in September, the highest figure since the bank began keeping statistics in 1998.
To boost the sagging property market, Finance Minister Choi Kyung-hwan and his team eased the rules on mortgages, such as the loan-to-value ratio (LTV) and the debt-to-income (DTI) ratio, as well as the rules on tearing down old apartment buildings to build new ones. Old apartments have been regarded as investments, as prices soar when developers want the land.
The major culprit behind the price hikes is a growing demand for jeonse due to the government's relaxation of its housing redevelopment rules.
Also, with the low interest rates, an increasing number of landlords are now favoring monthly rent instead of jeonse. Experts say that as the fall moving season approaches, more tenants will be affected by rent hikes.
Lee Ju-hee, 37, an office worker, said she was preparing to move out of her apartment because her landlord wants her to pay monthly rent instead of jeonse.
"I have used up all the money I have earned to pay higher and higher deposits over several years," she said. "I cannot think about my future and cannot even plan to have a baby because of the financial burden."
A real estate agent in Gireum-dong, Seoul, said that many homeowners tend to require monthly rent instead of jeonse as low interest rates make the jeonse system less profitable.
"More and more landlords prefer monthly rent," he said. "Some landlords are choosing to lease their homes on a half-jeonse and half-monthly rent system."
Also, since the global financial crisis started in 2008, the supply of apartments in Seoul and surrounding areas has dwindled, contributing to higher rents in the region, experts said.
Jeong Soo-young, 40, recently purchased an apartment in Jeongneung-dong, northern Seoul, despite lingering uncertainty in the property market.
After renting an apartment for two years under the "jeonse" system, her landlord raised the required security deposit, and she couldn't afford to stay there on her income.
"When the lease was about to expire, my landlord said he was raising my deposit by 50 million won if I wanted to renew," she said. "So I decided on a home purchase."
She took out a mortgage to buy her current apartment, which measures 76 square meters, for 300 million won.
"There was no difference whether I increased my deposit or took out a mortgage to buy a home because the price gap is not much these days," she said.
Jeong is one of many "jeonse" tenants whose life has been affected by relentlessly soaring rents. The jeonse system is a financing tool unique to Korea in which the tenant pays the landlord a large deposit when a contract begins. The landlord returns the money with no interest when the contract expires, typically after two years.
Low- and middle-income families had long relied on the jeonse system because home ownership was out of reach for many, and jeonse was seen as a more affordable alternative.
However, the nation's real estate market has been in a slump since 2008, discouraging speculation and bringing the upward spiral of home prices to a halt. This has had the effect of pushing up jeonse prices.
According to Kookmin Bank's housing price index in September, the average jeonse price for apartments in Seoul has hit a record high of 310 million won.
The difference between the cost of buying a home and renting one stood at 64.6 percent in September, the highest figure since the bank began keeping statistics in 1998.
To boost the sagging property market, Finance Minister Choi Kyung-hwan and his team eased the rules on mortgages, such as the loan-to-value ratio (LTV) and the debt-to-income (DTI) ratio, as well as the rules on tearing down old apartment buildings to build new ones. Old apartments have been regarded as investments, as prices soar when developers want the land.
The major culprit behind the price hikes is a growing demand for jeonse due to the government's relaxation of its housing redevelopment rules.
Also, with the low interest rates, an increasing number of landlords are now favoring monthly rent instead of jeonse. Experts say that as the fall moving season approaches, more tenants will be affected by rent hikes.
Lee Ju-hee, 37, an office worker, said she was preparing to move out of her apartment because her landlord wants her to pay monthly rent instead of jeonse.
"I have used up all the money I have earned to pay higher and higher deposits over several years," she said. "I cannot think about my future and cannot even plan to have a baby because of the financial burden."
A real estate agent in Gireum-dong, Seoul, said that many homeowners tend to require monthly rent instead of jeonse as low interest rates make the jeonse system less profitable.
"More and more landlords prefer monthly rent," he said. "Some landlords are choosing to lease their homes on a half-jeonse and half-monthly rent system."
Also, since the global financial crisis started in 2008, the supply of apartments in Seoul and surrounding areas has dwindled, contributing to higher rents in the region, experts said.
![[ANALYSIS] Tesla, BYD's price cuts unnerve LGES, Samsung, SK](https://img.koreatimes.co.kr/upload/thumbnailV2/b1cf8ba68d474cb69352bfe7ea9d14f0.jpg/dims/resize/178/optimize)
![[INTERVIEW] How ATEEZ achieved worldwide success](https://img.koreatimes.co.kr/upload/thumbnailV2/c7723b56dde94eb4b260950d368fe8fb.jpg/dims/resize/178/optimize)
