Young People See No Hope Amid Soaring Home Prices
The snowballing cost of housing and student-loan debt are fueling disenchantment and frustration among young people.
Saddled with debt before they have even started their working life, they see less and less hope of ever getting on the property ladder without facing a lifetime of mortgage repayments.
Some 90.9 percent of people in their 20s and 30s in the Seoul metropolitan area are renting their home. The average deposit lease for a studio in Seoul in August was W19.46 million and the average monthly rental W774,000 (US$1=W1,123).
A 2015 survey by the Ministry of Employment and Labor showed that average monthly earnings for those in their 20s were W1.72 million, with those on permanent contracts making W2.07 million and those on temporary contracts just W1.06 million. And they spend half their earnings on housing, as against the recommended proportion of one-third.
One newly-wed couple in Seoul sold their studio for W200 million three years ago and took an apartment on a Korean-style deposit lease for W400 million with a loan of W150 million.
The apartment, which was worth W550 million at the time, is now going for W700 million. "Our lump sum deposit remains the same, but the price went up so sharply that we had to move out to other cheaper place," the couple said.
The prices of deposit leases have gone up so much that even high-earning young people cannot afford them. The average for apartments in Seoul was W370 million at the end of 2015 but has risen 17.3-percent to W434 million in just two-and-a-half years.
The average net worth of those in their 30s with an average household income of W70 million per year was W218 million in 2016, not even half the average deposit lease for an apartment in Seoul.
Even many who own their home feel the pressure because of the huge loans they took out. A 33-year-old employee bought an apartment in northern Seoul early this year for W620 million with a loan of W40 million and a deposit of W500 million from a lease tenant. This means W540 million that went into the apartment is debt.
"Even if I own the apartment, I don't have the W500 million that I have to return to the tenant, so I can't live in it. I'm so worried if interest rates go up or rental prices are going down," Kang said.
The anxiety that comes with not owning a home in the midst of a price explosion is pushing many young people to take out excessive loans and try to get by with a nugatory disposable income.
According to the Korea Credit Information Services (KCIS), people in their 30s or younger took up 84 percent of those who took loans to buy a home last year.
"Young people have a hard time accumulating wealth, so if they buy a house with a loan, they are vulnerable to risks like increases in interest rates and sudden drops in home values," said Park Sun-woo at the KCIS.