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Death of Korea's 'apartment king' leaves 100s in property purgatory

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Re: Death of Korea's 'apartment king' leaves 100s in property purgatory

#51

Post by maeil »

pigtailgirl wrote: post #41

- i did jeonse - and was jeonse landlord - used savings for 2 years of key money - paid no rent for 2 years - saved like mad for them 2 years - moved out after 2 years - took my savings + jeonse return - bought a house - got a mortgage on a second place using first place + jeonse deposit from my tenet - now own 2 places that appreciate faster than any other investment could have made - last year - sell them both - pa…

> morgage in SK is very very difficult to get - most people early in life not qualifying for one

This is the same in the large majority of other wealthy countries. The difference is that in Korea the pressure for a newly married couple to move straight into a bought or at least jeonse apartment is much bigger. Paying monthly rent is seen as a sin. This completely unrealistic expectation isn't nearly as strong in e.g. urbanized Western-Europe, in some of which it's even harder to get a mortgage than in Korea.

This is boosted by the societal fantasy of ever-rising property prices. This again is also seen elsewhere but in Korea it's much more extreme. Completely understandable as they've been rising for multiple decades straight, but still wildly unrealistic. Japan has gone through the exact same process in the past.

Re: Death of Korea's 'apartment king' leaves 100s in property purgatory

#53

Post by pigtailgirl »

vore wrote: post #49
pigtailgirl wrote: post #41

- i did jeonse - and was jeonse landlord - used savings for 2 years of key money - paid no rent for 2 years - saved like mad for them 2 years - moved out after 2 years - took my savings + jeonse return - bought a house - got a mortgage on a second place using first place + jeonse deposit from my tenet - now own 2 places that appreciate faster than any other investment could have made - last year - sell them both - pa…

It's great it worked for you to get you your "1 nice house with no mortgage", but as the article states this only works if property prices don't fall. I think your comment completely disregards the really bad flip side of this scheme that the article is talking about and you are cherry-picking your personal anecdote to... flex...?

-- most people here not trying to build house of card scam jeonse empires is point of my post - korea is usually quite an honest country - assume positive intent! =) --

Re: Death of Korea's 'apartment king' leaves 100s in property purgatory

#54

Post by pigtailgirl »

maeil wrote: post #51
pigtailgirl wrote: post #41

- i did jeonse - and was jeonse landlord - used savings for 2 years of key money - paid no rent for 2 years - saved like mad for them 2 years - moved out after 2 years - took my savings + jeonse return - bought a house - got a mortgage on a second place using first place + jeonse deposit from my tenet - now own 2 places that appreciate faster than any other investment could have made - last year - sell them both - pa…

> morgage in SK is very very difficult to get - most people early in life not qualifying for one This is the same in the large majority of other wealthy countries. The difference is that in Korea the pressure for a newly married couple to move straight into a bought or at least jeonse apartment is much bigger. Paying monthly rent is seen as a sin. This completely unrealistic expectation isn't nearly as strong in e.g.…

-- Korea is still an emerging country - 40 years ago we were basically "3rd world" - still a lot of growth to go! --

Re: Death of Korea's 'apartment king' leaves 100s in property purgatory

#55

Post by IG_Semmelweiss »

pigtailgirl wrote: post #53
vore wrote: post #49

Earlier quoted context omitted.

It's great it worked for you to get you your "1 nice house with no mortgage", but as the article states this only works if property prices don't fall. I think your comment completely disregards the really bad flip side of this scheme that the article is talking about and you are cherry-picking your personal anecdote to... flex...?

-- most people here not trying to build house of card scam jeonse empires is point of my post - korea is usually quite an honest country - assume positive intent! =) --

Thats ok.

But there are bad apples everywhere. This seems like Russian roulette - gambling your early life financial stability in that your landlord is a usual straoght arrow so you can pay nominally lower rent.

Even a 5% counterparty risk in return for marginally lower rent seems like a bad deal considering the amount at risk is life changing. The deposit is not held in escrow. A loss of a non collaterized 300k loan in early marriage couples could be devastating.

Re: Death of Korea's 'apartment king' leaves 100s in property purgatory

#56

Post by em-bee »

skim1420 wrote: post #18
Eisenstein wrote: post #2

Can someone explain how this 'Jeonse' system works? The article is vague -- it states that a large deposit is required equal to around the price of the entire property, but why? Do they still have to pay rent? Why won't they get their deposit back if the state takes ownership? Shouldn't huge deposits be in escrow? None of this makes any sense to me.

In Seoul in the late 90s I paid some $50K equivalent jeonse for a ~1000 sqft apt, with no further monthly rent. From what I understood, the landlord can make back something equivalent to rent via common interest rates. I was young and frankly didn't understand the exposure or workings at play in this article. Historically, in Korean culture it was very common for the extended family to live together. When a child mar…

actually, the reason to live with the parents had nothing to do with money. traditionally, the oldest son would take over the household of his parents when he gets married.

this is still very common in china and it is seen in many other cultures, so i expect korea to be similar.

Re: Death of Korea's 'apartment king' leaves 100s in property purgatory

#57

Post by [deleted] »

pigtailgirl wrote: post #54
maeil wrote: post #51

Earlier quoted context omitted.

> morgage in SK is very very difficult to get - most people early in life not qualifying for one This is the same in the large majority of other wealthy countries. The difference is that in Korea the pressure for a newly married couple to move straight into a bought or at least jeonse apartment is much bigger. Paying monthly rent is seen as a sin. This completely unrealistic expectation isn't nearly as strong in e.g.…

-- Korea is still an emerging country - 40 years ago we were basically "3rd world" - still a lot of growth to go! --

[deleted]

Re: Death of Korea's 'apartment king' leaves 100s in property purgatory

#58

Post by vulcan01 »

> It all works if real estate prices keep rising, if the owner can get one tenant to replace another without any vacancy, if the rules of the game remain the same and if the mastermind can manage the accounting nightmare of dealing in and keeping track of so much unsecured debt. It fails if any one of the many participants fails to play their part, or if any of the conditions change.

This sounds like a pyramid scheme, doesn't it?

s/tenant/investor

s/play their part/ask for their money back

Re: Death of Korea's 'apartment king' leaves 100s in property purgatory

#59

Post by lathiat »

Aged care in Australia apparently works somewhat like this. You can pay in a lump sum that your estate later gets back. They invest or use it as capital for building more aged care etc.

Many well their home to finance it.

I’m sure the details are a little different but the idea seems similar.

Re: Death of Korea's 'apartment king' leaves 100s in property purgatory

#60

Post by nmehner »

maeil wrote: post #50
victorology wrote: post #35

Here's an example to explain jeonse. An apartment might have a purchase price of $500k and a jeonse "rental" price of $300k. If you rent under jeonse, you pay this $300k deposit to move into the apartment and you get it back fully when the lease expires. You could also pay monthly rent for $2k a month if you choose to rent on a monthly basis with low deposit. Tenants like to rent under jeonse because it feels like fr…

> The opposite happens when real estate prices go down as they have been for the past 6-12 months. I'm really nitpicking here but overall they've barely gone down over that period. Certain types of real estate may have gone down by 0.1-1% but that's negligible. The Korean news likes to bring it as if real estate is crashing but that's because even prices staying equal was unthinkable in the minds of many Koreans afte…

Looking at demographics: https://en.wikipedia.org/wiki/Demographics_of_South_Korea in 1955 900.000 people were born in Korea. In 2022 about 250.000. The population in 2021 only decreased by 60.000 but this number will increase rapidly.

Seoul might not change for a few years but a population decrease of 1% each year will not leave the property market unaffected.

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