400 million won of jeonse doesn't get you much these days

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400 million won of jeonse doesn't get you much these days

Published: 11 Aug. 2020, 20:06

View of Songpa District, southern Seoul. [NEWS1]

Even if you manage to get your hands on 400 million won ($338,000), you'll still have trouble securing an apartment using a jeonse long-term lease.

According to data from a real estate app Zigbang on Monday, of all jeonse contracts made in the first half in Seoul, only 52.7 percent were priced below 400 million won.

Under Korea’s unique jeonse system, a person can make one lump-sum payment in order to live in a property for a number of years. They receive the entire amount back, without interest, at the end of the contract.

Of all jeonse transactions made in the first half of the year, those priced under 200 million won only account for 13.7 percent, while those priced between 200 million won to 400 million won were 39 percent of the total. Apartments with deposits of between 400 million won to 600 million won were 29.1 percent of all transactions, while those between 600 million won to 900 million won were 13.2 percent. Around 5 percent of all jeonse contracts were above 900 million won.

The median sale price of an apartment flat in Seoul is around 900 million won.

In 2011, jeonse apartment units priced 400 million won were 89.7 percent of all jeonse transactions. That declined to 64.1 percent in 2016 and eventually reached 52.7 percent this year.

Jeonse leases costing 200 million won or under were 43.3 percent of the total in 2011. That fell to 13 percent in the first half of this year.

The situation is most evident in affluent southern Seoul.

In the three greater Gangnam districts — Gangnam District, Seocho District and Songpa District — only one out of 10 jeonse apartments were priced lower than 400 million.

Low-priced jeonse transactions were mainly concentrated in Nowon District, Dobong District and Gangbuk District, all in northern Seoul, in which 88 percent of all contracts were priced 400 million won or under.

In Seoul’s southwestern areas — Gwanak District, Geumcheon District and Guro District — some 76 percent of all jeonse transactions were priced at 400 million won or under.

People with little money have no choice but to settle for old and outdated houses.

In the first half, a person with less than 200 million won was only able to get a 43.5-square-meter (468.2-square-foot) jeonse apartment. With the same amount of money, a person could get a 62.7-square-meter jeonse flat in 2011.

A person seeking an 85-square-meter apartment unit will have to pay a jeonse of 600 million won.

According to data by Zigbang, flats with a jeonse price of 200 million won or under were constructed on average 22 years ago, while those that cost between 200 million won to 400 million won were from units built on average 21.1 years ago.

The jeonse flats priced higher than 900 million won are on average 15.1 years old.

“It is time to come up with various measures to improve the quality of residences according to the demands from jeonse tenants,” said Ham Young-jin, head of the big data lab of Zigbang.

The situation is likely to be tougher in the second half of the year.

According to Korea Appraisal Board, the jeonse prices in Seoul rose 1.98 percent from Jan. 1 to Aug. 5. The increase was led by the greater Gangnam areas: jeonse prices in Gangnam District rose 3.48 percent, in Seocho District by 3.38 percent and in Songpa District by 3.05 percent.

The jeonse prices in Dongjak District, southern Seoul, increased by 2.85 percent followed by Seongdong District, eastern Seoul, by 2.46 percent and Gangbuk District, northern Seoul, by 2.12 percent.

BY HAN EUN-HWA, CHEA SARAH [chea.sarah@joongang.co.kr]