Jeonse prices soar to 60% of property value

Lump-sum deposits, or jeonse, neared 60 percent of average housing prices in Seoul and its surrounding areas in the first quarter, reflecting a growing burden on low- and middle-income living on leases.

A report on the housing market by KB Bank on Thursday said deposits for jeonse stood at 58.9 percent of apartment prices on average, the highest since it reached 59.5 percent in November 2004.

Jeonse prices have been accelerating recently with low interest rates, prompting homeowners to shift taking fat deposits and instead collecting monthly rent, or wolse instead.

Homeowners are either increasing the jeonse deposits to compensate for shrinking interest earnings or opting for wolse, which guarantee regular income on a monthly basis.

“Inquiries for jeonse property come a lot more frequently than those for wolse properties. Seoul tenants nowadays have very little option for jeonse properties despite higher deposits required,” a realtor in Myeong-dong in downtown Seoul said.

Jeonse costs have been rising for 26 consecutive months since February 2009. The figure for Seoul stood at 46.8 percent, the highest level since October-2006. Jeonse costs were the highest in proportion to home prices in Gwangju, at 74.9 percent, followed by Ulsan with 72.9 percent.

The country’s mobility fell last year, as high prices discouraged people from finding a new place at a reasonable cost. Statistics Korea said a total of 8.23 million changed their legal residence last year, down 3.1 percent from a year earlier.

By Cynthia J. Kim (cynthiak@heraldcorp.com)