Housing — South Korea · Synthesis

An affordability crisis in Seoul. Property prices in the capital, Seoul, rank among the least affordable in the world relative to incomes. The concentration of population, jobs and the best schools in the capital region aggravates the tension.

The 'jeonse', a unique system. South Korea has a singular rental system, the 'jeonse': the tenant pays the landlord a substantial lump-sum deposit (often the majority of the property's value), recovered at the end of the lease, instead of a monthly rent. This system, linked to interest rates, experienced tensions (defaults, 'jeonse scams') when rates rose.

Household debt inflated by real estate. Housing and jeonse fuel household debt among the highest in the world (see Economy category), creating a major financial vulnerability and high sensitivity to rates (see Prices category).

An average home-ownership rate. The owner-occupancy rate is around 60%, but access to ownership is declining among young people facing high prices — a cited factor in the very low fertility rate (see Economy category).

Strong public intervention. Housing is a central political issue, with numerous interventions (regulations, taxes on multiple-property owners, public construction) whose effects are debated.

Restoring affordability in Seoul. Reducing tension in the capital region, through supply and decentralisation, is a central challenge, linked to excessive concentration around Seoul.

Stabilising jeonse and debt. Managing risks linked to jeonse and controlling household debt are financial stability challenges (see Economy and Prices categories).

Housing and fertility. As housing costs are cited among the barriers to fertility, affordable housing policies for young households are linked to the national demographic challenge.

Decentralisation. Reducing concentration around Seoul is a spatial planning and affordability challenge.

The open questions. Three issues will shape the period: (1) restoring affordability in Seoul; (2) stabilising jeonse and debt; (3) supporting housing for young households.

Placed in its environment, South Korea faces a major affordability crisis and a unique rental system, with record debt.

Three takeaways. (1) Ownership: average. At ≈ 60%, the South Korean ownership rate is close to France (≈ 58%) and Japan (≈ 61%), above Germany (≈ 47%).

(2) Jeonse, a singularity. This lump-sum deposit rental system has no equivalent in the countries compared.

(3) Affordability in Seoul. The price-to-income disconnect in Seoul is among the most severe in the world, comparable to the worst markets (Vancouver, Hong Kong).