Housing, Jeonse and Household Debt

How Korea's unique jeonse rental system works, why Seoul housing prices soared, and why household debt is among the highest in the world.

Housing is a major economic and political issue in South Korea.

Jeonse

Korea has a unique rental system called jeonse:

Tenants pay a large lump-sum deposit, often 50 to 80 percent of the home’s value, instead of monthly rent.
Landlords invest the deposit or use it to buy more property.
The deposit is returned at the end of the lease.

Risks of jeonse

When prices fall, landlords may not be able to return deposits.
In 2022-23, a wave of jeonse fraud cases left many young tenants losing their deposits.

Soaring Seoul prices

Apartment prices in Seoul rose sharply, especially between 2017 and 2021, making homes unaffordable for many young people.

Household debt

Korea’s household debt is around 90 to 100 percent of GDP, among the highest in the world, driven by mortgages and jeonse loans.

Policy responses

Loan limits and taxes on multiple homeowners.
Public housing supply.

The jeonse deposit

A young couple borrows to pay a 300-million-won jeonse deposit for a Seoul apartment. When the landlord can't return the deposit after prices fall, they face a crisis.

Thinking renting always means monthly rent

Korea's jeonse system uses a large returnable deposit.

Key takeaways

Jeonse tenants pay large deposits instead of monthly rent.
Jeonse fraud hit many tenants in 2022-23.
Seoul housing prices soared between 2017 and 2021.
Household debt is around 90 to 100 percent of GDP.