[Report] Only Three Listings Found After Three Hours... Trying to Find Jeonse Directly with Youth Loans

Young People Use Small and Medium Business Administration Loans to Prepare Jeonse Funds
No Suitable Properties Available, Jeonse Search Difficult
Even If Conditions Met, Only 4-Pyeong Semi-basement One-room Available

On the afternoon of the 14th, in Daejo-dong, Eunpyeong-gu, Seoul, I spent three hours visiting real estate agencies to find rental properties under 100 million won with loans from the Small and Medium Business Administration, but there were only three listings that met the criteria. Villa neighborhood in Eunpyeong-gu, Seoul / Photo by Hwang Seoyul

[Asia Economy Reporter Hwang Seoyul] "Small and Medium Business Administration (SMBA) loans? Just today, three customers inquired under similar conditions but all left empty-handed," said a representative from A Real Estate Agency in Daejo-dong, Eunpyeong-gu, Seoul.

On the afternoon of the 14th, the reporter visited Daejo-dong, Eunpyeong-gu, Seoul, to find a jeonse (long-term lease) property using a youth-targeted jeonse loan product. After searching the local real estate market for three hours, only three jeonse listings were found. When mentioning conditions such as ▲under 100 million KRW ▲youth SMBA loan (hereafter SMBA loan), the agency representatives eagerly searched for listings but responded that it was difficult to find suitable properties.

The SMBA loan is a youth jeonse loan that allows borrowing up to 100 million KRW at a low interest rate of 1.2% per annum, and over 90,000 people used it in 2020 alone. Eligible applicants include ▲those aged 34 or younger employed at small and medium-sized enterprises (SMEs) or mid-sized companies ▲households with a combined annual income of 50 million KRW or less, or single household heads earning 35 million KRW or less ▲youth who are household heads without home ownership. ▲The loan covers jeonse deposits up to 200 million KRW ▲and properties with exclusive area of 85㎡ (approximately 25 pyeong) or less.

Due to the high jeonse prices and the shortage of jeonse listings, it was difficult to find a room with good housing quality even with loans from the Small and Medium Business Administration.
Photo by Hwang Seoyul

For young people lacking a lump sum, the SMBA loan is a ray of hope, but the scarcity of jeonse listings reduces its effectiveness. The head of B Real Estate said, "From the landlord's perspective, even if they put their jeonse deposit into a savings account, the annual interest is less than the monthly rent they would receive in a year," adding, "there is no reason for landlords to offer jeonse." According to Seoul City real estate transaction data, the number of single-family and multi-family jeonse transactions by youth using loans last month was 128, down 48 from 176 the previous year. Multi-unit and row houses also decreased from 445 last year to 306, a drop of 139.

Agency representatives agreed that the strict conditions of the SMBA loan further limit options for youth. To meet the SMBA jeonse listing criteria, ▲neighborhood living facilities are not allowed ▲and the loan-to-value ratio (priority lien) relative to the official property price must be at an appropriate level. A representative from C Real Estate said, "In the past month, 45 jeonse listings under 100 million KRW were registered at this agency, but none qualify for the loan."

A banner promoting sales and lease inquiries is displayed at a newly constructed one-room building in Eunpyeong-gu, Seoul/Photo by Hwang Seoyul

Rising jeonse prices compared to before is another reason for reduced effectiveness. The B Real Estate representative said, "Two years ago, a two-room apartment in this area was traded for 120 million KRW," adding, "now even a 4-5 pyeong studio starts at 80 million KRW."

Only three listings meeting the conditions were found, but the quality of housing was poor. Two were about 4 pyeong, the minimum residential standard for one person, and one was a semi-basement unit. According to the Ministry of Land, Infrastructure and Transport’s ‘2020 Housing Survey Results’ announced in August last year, the proportion of youth households living in basements, semi-basements, or rooftop units increased by 0.1 percentage points from the previous year to 2.0%. Even with jeonse support for youth, the quality of youth housing remains the same or has worsened.

Seo Jin-hyung, President of the Korea Real Estate Society and professor at Gyeongin Women's University, said, "The youth jeonse support policy has reduced jeonse listings under 100 million KRW," adding, "Increasing workers’ disposable income to enhance their real economic power would be a more fundamental help in alleviating housing cost burdens."

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