Jeonse prices are about to jump...

We bought land in the country 280 평, and built a house. Two years later My it’s no longer in the country its quickly turning into a down town area complete with elementary school And police station. When we moved in it was a ri 리? Now its a dong. The land values just keep shooting up.

We bought land in the country 280 평, and built a house. Two years later My it’s no longer in the country its quickly turning into a down town area complete with elementary school And police station. When we moved in it was a ri 리? Now its a dong. The land values just keep shooting up.

Thanks. It totally makes sense then.
Although, in that case, the Moon government didn't have much to do with it 

Yeah, I'm pretty sure people living in places like: Auckland, Perth, Paris
Oslo, Vancouver etc. are fretting that they don't live in the USA.  The USA has
more of everything.  More overdoses. More crime. More guns. More
homicides. More people without basic health care. More civil unrest.
More virus. More obesity.  The list is almost endless.

Tell that to Parisians who have to live further and further out because they can't afford to live in the city center anymore and who have less good paying jobs to go with that.  Tell that to Parisians who must bypass the suburban "no go zones" and gangs there.  Tell that to the Parisians who nearly rioted when Macaroni (Macron) tried to carbon tax their commuting ass when they were already living on the margins.  Prices in London are through the roof.  Unless you work in IT or Finance, you might as well expect to be both treated and paid like a second class citizen.  (You will not be able to afford a decent "flat" as they call their apartments over there.)  Also, extremists in these places set off a bomb or shoot some guns every so often.  The grass isn't always greener on the other side. 

Back to the topic: Like I wrote earlier, 2+2 years and 5% increase cap
http://www.koreaherald.com/view.php?ud=20200730000872

It applies to already existing rental contracts. So if someone lives in a Jeonse now, they can continue to live there for 2 more years beyond the original term with no more than 5% increase in rent. If someone is planning to go jeonse in the future, or move to a different place, then expect to pay "upfront" the 4 year worth of increase.
As a landlord, I'm not thrilled about this. Our tenants have 8 months or so left, and looking at the current market prices, we could charge some 20% more right now. By the time the renewal comes, it could be even more. But instead, we will only be able to charge 5%. Should they decide to stay 2 more years, we would have no choice but to wait and raise 40 or 50% after their 2+2 years are over. There is a good chance though that they would move out, in which case we could charge market price to the new tenants. They are a young couple with a 1 year old baby. I don't think they own a property so if I were them, I would go ahead and buy something, instead of waiting 2 more years for real estate prices to go up even further. We will see.
The ruling party is losing voters like crazy...

Did your mortgage go up by 20%?  Do you have to charge someone that rate just because you can?  You could choose to raise it by a less amount and still make the mortgage payment.  If you had just bought a new building and had a higher mortgage than charging a higher rent would be understandable, I guess.

I would be curious to hear where that is.

Don't you live in 청주? I don't see that kind of increase there. I guess you couldn't even find a place in Seoul that registered that kind of a steep climb. Is your place scheduled for rebuilding or something? That is about the only case when the value can double in a short period of time. Is it an apartment or some other type of housing?
I saw an article from last month that pointed out one apartment complex in 청주 that increased a lot. I assume they picked the one with the highest increase. But even that one is nowhere near double the value from 3 years ago. More like slightly under 50%. That is still very good though. It was the Doosan We've GWell City.

I'm not doubting your word just wondering what could've triggered that kind of increase.

I assume Seoul Gyeong gi area.  Rest of the country isn't seeing that kind of pressure. 

The first thing I did 2.5 yrs ago after marriage was borrow a ton of money and buy a house with my wife.

Thanks to the disastrous real estate policies that just keep coming and coming our house has very nearly doubled in value in less than 3 yrs.

It was probably the best investment I’ll ever make and I no longer feel uneasy about borrowing so much money on my mortgage.

I realize a lot of people in Korea are unhappy with the real estate situation but I personally couldn't be happier.

T.C.

Only if you can sell it now.  If price or market drops, so does your count.  Don't count your chickens till they're hatched. 

Did your mortgage go up by 20%?  Do you have to charge someone that rate just because you can?  You could choose to raise it by a less amount and still make the mortgage payment.  If you had just bought a new building and had a higher mortgage than charging a higher rent would be understandable, I guess.

There is no mortgage. Should I let someone live there for free then? What does mortgage have to do with rents anyways?
Property prices went up, so the rent naturally follows that. People can choose to do monthly rent, jeonse or purchase, depending on their circumstances. Our tenants might have more dough than we do for all I know. I do know that they didn't take out a big loan for this jeonse. They could've bought another place or even our place because it was on sale as well back then. They chose jeonse.
Again, I'm not setting the prices, the market does. But I'm not some sort of a charity to ask for less money for something than what its worth. The same way, if prices were to go down, I would lower the rent. That's how it works.

Only if you can sell it now.  If price or market drops, so does your count.  Don't count your chickens till they're hatched. 

Exactly. It's not yours until you sell it and have that money in the bank, otherwise so what. When they get negative equity, these same people boasting now about how great buying property is, will be the ones calling it a scam and how you should never buy property. Things can change up real fast and with the US economy just having its worst quarter ever in recorded history it looks like we are in for quite a ride.

Even with unemployment spiking as the coronavirus pandemic swept South Korea in February, Baek Seung-min asked his wife to quit her nursing job to help reach a dream they had spent a lifetime chasing: buying their own apartment.

The 35-year-old interior designer said giving up his wife’s 58 million won ($48,000) salary would improve their chances of securing a property after the government introduced a host of measures aimed at cooling rampant property prices.

The unusual plan was to cut his wife’s income for a while so the couple’s annual earnings were low enough to be eligible for a quota system in new property developments designed to give more low-income newlyweds access to housing.

https://www.reuters.com/article/us-southkorea-economy-middleclass-insigh/lost-seoul-south-korean-middle-class-dreams-spoiled-by-soaring-house-prices-idUSKCN2520K8

Despite more than 20 cooling policies introduced by President Moon Jae-in’s government, home prices in Seoul have risen more than 50% since 2017, the fastest pace in the world, according to statistics site Numbeo.

There is no mortgage. Should I let someone live there for free then? What does mortgage have to do with rents anyways?
Property prices went up, so the rent naturally follows that. People can choose to do monthly rent, jeonse or purchase, depending on their circumstances. Our tenants might have more dough than we do for all I know. I do know that they didn't take out a big loan for this jeonse. They could've bought another place or even our place because it was on sale as well back then. They chose jeonse.
Again, I'm not setting the prices, the market does. But I'm not some sort of a charity to ask for less money for something than what its worth. The same way, if prices were to go down, I would lower the rent. That's how it works.

Have you ever lowered the rent?

This pandemic has shown the US shakey economy is built on sand and it's completely fallen away. It won't recover from this.

U.S. companies’ profit growth forecasts for the next five years are still intact, according to Refinitiv data, suggesting that the impact inflicted on companies by the coronavirus pandemic is likely to be more fleeting than that in previous crises.

According to consensus estimates data available on Refinitiv, companies in the MSCI United States index .dMIUS00000PUS are likely to post annualized profit growth of 12% in the next five years, double the rate in the past five.

https://www.reuters.com/article/us-usa-earnings/u-s-earnings-recovery-may-be-faster-than-in-previous-crises-idUSKCN25328B

“The current consensus expectation is that earnings will recover sharply from 2021 onwards and that the coronavirus impact will be limited to 2020,” Alain Bokobz, head of global asset allocation at Societe Generale, said in a report.

Have you ever lowered the rent?

Yes, I have. A bunch of new apartments were finished nearby so that meant suddenly hundreds of jeonse places appeared on the market. That kind of oversupply pulled down the prices in the whole area. We started lowering the rent, first 5% and than 10%. No takers, nobody even came to see the place. So we got no choice but to further lower the price. By the end, it was on the market for almost 30% lower than before. At which point, we were like "screw it, we are not going to rent it out for peanuts". So we moved in ourselves. It turned out to be a good thing after all, but back then it was very stressful. Jeonse prices bounced back a few months later.

Yes, I have. A bunch of new apartments were finished nearby so that meant suddenly hundreds of jeonse places appeared on the market. That kind of oversupply pulled down the prices in the whole area. We started lowering the rent, first 5% and than 10%. No takers, nobody even came to see the place. So we got no choice but to further lower the price. By the end, it was on the market for almost 30% lower than before. At which point, we were like "screw it, we are not going to rent it out for peanuts". So we moved in ourselves. It turned out to be a good thing after all, but back then it was very stressful. Jeonse prices bounced back a few months later.

A big increase in supply will, usually, result in a price drop.  This is something
Moon Jae-in doesn't quite understand.

I thought this was interesting enough to dig up this thread:
https://www.seoul.co.kr/news/newsView.php?id=20201014500054&wlog_tag3=naver

Apparently, 9 different families/groups of people went to see a jeonse apartment, so they had to wait in line.
5 of them wanted to rent it out, so they had to do "rock-paper-scissors" to decide who will be the lucky tenant.
This one picture and story sums up pretty well what's going on now, and how scarce jeonse has become.

Yeah. It is a weird system that deserves a decent burial anyway.
It exists ONLY in Korea and was conceived at a time when interest
rates were 16-18%.

These days young people find it impossible to buy. Also the gov't
has restricted loans???  How can young people ever hope to buy
if the gov't shuts off funding.

The bright side is, it is a great time to be a property owner. Our
apartment increases in value at about 50,000,000won/year. Add to
that it is a bumper year for the private education sector in Korea.
The SARS-CoV-2 virus is terrible, but this year our net wealth has
risen more than at any other time.

www.youtube.com/watch?v=2M16QSsOggY