Unusual $828 Billion Loan Market Magnifies Housing Risk in Korea
- Jeonse loans for renting homes give landlords leveraged funds
- Switching from the loans may fuel housing slump and defaults
Residential buildings in Seoul, South Korea.
Photographer: SeongJoon Cho/BloombergThis article is for subscribers only.
South Korea’s property market risks an accelerated slide triggered by quirks in renting practices, an outcome that would put its sputtering economy under more pressure and test the confidence of investors already spooked by recent financial sector turmoil.
The vulnerability stems from the common choice of tenants to stump up outsized deposits known as jeonse for landlords instead of paying monthly rent. This widespread practice supplies property owners with leveraged cash, putting jeonse at the heart of real estate speculation and financial imbalances in the country.