‘Jeonse’ prices continue on upward spiral despite the government’s efforts to reign in its upward spiral
January 22, 2014 Leave a comment
2014-01-19 16:37
‘Jeonse’ prices continue on upward spiral
By Kim Tae-jong
“Jeonse” prices in Seoul have jumped by 0.47 percent in the first three weeks of 2014 year despite the government’s efforts to reign in its upward spiral, recent data showed Sunday.Jeonse is a Korean-style lease system in which a housing tenant deposits a lump sum of money instead of paying monthly rent. The money must be returned once the contract ends.
The rate of increase is much higher than that in the same period last year when it stood at 0.35 percent, according to online real estate information provider R114.com.
In particular, jeonse across the country increased 0.2 percent on average during the same period, the 73rd consecutive week of rises and the longest streak in the country’s history. Comparable prices in metropolitan areas rose 0.27 percent. They jumped a respective 0.36 percent and 0.31 percent last year.
The price hike is expected to increase the financial burden on working-class and lower-income households, who prefer this rental scheme.
Jeonse has continued on an upward spiral as more people avoid buying homes and stick to the system due to lingering uncertainties in the real estate market.
In addition, there is growing demand for jeonse due to housing reconstruction projects in many districts in Seoul. With low interest rates, more and more landlords are attempting to transform jeonse into monthly rent.
The upward trend in Seoul have also affected jeonse of the surrounding areas of the capital such as Bundang, Sanbon and Pyeongchon, as people who can’t afford prices in Seoul decide to move to those areas.
The trend contrasts with an initial forecast that the jeonse market would stabilize this year thanks to the administration’s measures.
The government announced deregulation measures last year to control jeonse and stabilize the property market. The nation’s real estate market has been in a slump since 2008.
Some of the measures include the exemption of heavy capital gain taxes on multiple home owners from Jan. 1 and loans with low interest rates to first time home buyers.
The growing financial burden for jeonse tenants would also result in the so-called “rent poor,” who struggle to pay back bank loans every two years without any plans to own a house.
“Already about half of jeonse tenants are indebted,” a Seoul analyst said. “A jeonse hike would make household debt problems worse, as it is much higher than salary increases.”
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