40 Million Won Increase in Jeonse Prices... Youth Jeonse Loans Facing 'Brazen Overcharging'

70 million won jeonse rises to 100 million won
Jeonse properties scarce, no options available
Bold rent hikes worsen housing quality

Lee Seonhwa (25), who found a house through a youth jeonse loan, said, "There were few options, so I had no choice but to choose the current house despite the high jeonse price." A real estate office in Daejo-dong, Eunpyeong-gu, Seoul / Photo by Hwang Seoyul

[Asia Economy Reporter Hwang Seoyul] Mr. A (26), a 20-something office worker who was looking for a rental house under 100 million won using the Small and Medium Business Employment Youth Jeonse Deposit Loan (SMB Youth Loan). He visited five real estate agencies but could only find three rental listings. Even those were small, 4-5 pyeong, semi-basement houses with poor living quality. After hearing from a real estate agent that "houses previously traded at 70 million won have raised their prices to 100 million won when renting to tenants using youth loan support," Mr. A was left wondering whether he should take out an additional loan.

There is a growing trend of landlords raising Jeonse prices targeting young tenants. Recently, many young people have been borrowing up to 100 million won through various youth support programs to find Jeonse housing, and landlords are taking advantage of this by raising the Jeonse price up to the loan limit.

The SMB Youth Loan, launched to ease young people's housing costs, allows borrowing up to 100 million won at a low interest rate of 1.2% per annum, and over 90,000 people used this loan in 2020 alone. Besides the SMB Youth Loan, there are several similar products such as ▲Youth Support Jeonse Deposit Loan (1.8%~2.4% per annum, up to 70 million won) ▲KakaoBank Youth Jeonse Deposit Loan (around 2% per annum, up to 100 million won). Landlords, aware that young tenants can borrow up to 100 million won, are boldly raising prices well above market rates. Since Jeonse listings are scarce, young tenants have no choice but to borrow more than originally planned and reluctantly agree to contracts.

A real estate agent in Eunpyeong-gu, Seoul, said, "Because there are few listings, properties sell quickly even at high prices." A real estate agent in Sillim-dong, Seoul, where many single-person households live, also reported, "A Jeonse house that could normally be rented for about 5 million won more was contracted at 40 million won higher when renting to a young tenant." The system designed to stabilize young people's housing has ironically raised Jeonse prices and worsened the quality of housing for young tenants.

Professor Im Jaeman of the Department of Real Estate at Sejong University explained, "The demand for loans has effectively become a factor driving up Jeonse prices," adding, "In the long term, this does not improve housing quality but only raises Jeonse prices, which is not good for tenants."

This content was produced with the assistance of AI translation services.