Jeonse payers still struggling to buy their own flats

Though apartment prices plunged significantly in recent years, a report by the KB Financial Group said yesterday it still isn’t easy for non-homeowners living on jeonse (or lump sum deposits) contracts to purchase their own houses.

The financial institution’s research institute analyzed the economic conditions of non-homeowners, or potential apartment purchasers, and concluded that for those living in jeonse apartments in the Seoul metropolitan area to buy a house, they would need a loan of more than 50 percent of the purchase price.

KB Financial said that the average net assets held by non-homeowners was 150 million won ($134,000), while the average apartment price is around 340 million won.

“For those living on jeonse, our study showed that more than half [56.6 percent] are three or four-member households with high expenditures,” said an official from KB Financial. “Also, they are getting squeezed as the growth in their incomes isn’t as high as the spike in jeonse deposits.”

The report comes as the government has been trying to boost the sluggish real estate market. On April 1, the government announced a string of measures to revive housing prices after a period of increasing jeonse prices and declining apartment prices.

Some homeowners who purchased apartments years ago with loans from financial institutions are either in negative equity or won’t be able to make a profit by selling their apartments at today’s prices.

“If expectations remain low that housing prices will go up and if the low interest rate trend continues, the portion of units that will be let out on monthly rent will expand,” said Lee Jong-ah, a researcher at KB Financial.

By Lee Eun-joo [angie@joongang.co.kr]