Young people in South Korea are struggling with homeownership due to soaring housing prices. Eight out of 10 in their 20s and 30s end up renting, as affording a home would mean saving for 15 years without spending any salary. Thus, the gap between those with parental support and those without is widening. ChosunBiz investigated to understand the challenges and explore potential solutions for young people. [Editor’s Note]
"Roughly one-third of my monthly salary is allocated to rent and maintenance fees. Although the 10 million won deposit and 600,000 won monthly rent pose a bit of a burden, securing a two-bedroom villa in Seoul at this price is considered quite affordable."Choi Yeon-ji (pseudonym, 33) from Nowon-gu, Seoul.
“I secured a jeonse (a unique Korean home rental system where tenants provide a substantial deposit instead of monthly fees) in Suwon near my job for 140 million won. The monthly expenses are lower than rent, making it less burdensome. Yet, with housing prices rising rapidly, the prospect of saving enough to purchase my own home feels daunting.”Kim Seong-jin (alias, 32) from Yeongtong-gu, Suwon-si, Gyeonggi Province.
The housing burden on young adults is escalating each year. According to the ‘Korea Housing Survey’ conducted by the Ministry of Land, Infrastructure, and Transport, young households faced an average deposit of 18 million won in 2022, coupled with a monthly rent of 377,000 won. For those opting for the jeonse system, the average deposit soared to 163.24 million won.
Zooming in on Seoul, a monthly rent of 400,000 won might seem reasonable. Young adults in Seoul are grappling with a minimum monthly rent of 690,000 won, as per insights from the real estate platform ‘Dabang.’ By August of the previous year, the average monthly rent for villas and studio apartments in Seoul stood at 690,000 won. Officetels, with their mixed-use design, commanded an average monthly rent of 720,000 won, while apartments reached an average of 1.02 million won.
In Seoul, the district with the highest monthly rent for studio apartments (33㎡ or smaller) is Gangnam-gu, averaging 910,000 won. This is followed by Yongsan-gu at 860,000 won, Seocho-gu at 850,000 won, Jungnang-gu at 780,000 won, Geumcheon-gu at 760,000 won, Dongdaemun-gu at 750,000 won, Seongdong-gu at 750,000 won, Yeongdeungpo-gu at 730,000 won, and so forth. On the flip side, Nowon-gu boasts the lowest monthly rent at 430,000 won, standing as the sole district in Seoul where the monthly rent dips into the 400,000 won range.
High housing costs pose a significant burden for young adults. The Rent Income Ratio (RIR), indicating the proportion of monthly rent to monthly income for young households, reached 17.4% in 2022, surpassing the 16% for general households. This discrepancy highlights the heavier housing cost burden borne by young households. A staggering 79.6% of young households voiced their struggle with the weight of rent and loan repayments.
Young households find themselves with limited discretionary income once living expenses and rent are accounted for. The Korea Housing Survey reveals that, out of a monthly income of 2.88 million won in 2022, young households spent an average of 1.62 million won on living expenses. This includes food, housing maintenance fees, clothing, education, healthcare, etc., excluding rental fees or loan principal. For a young individual residing in a studio apartment in Seoul, after settling rent, they are left with only 240,000 to 570,000 won as discretionary funds. The challenge intensifies for those who resort to loans for deposit payments.
With housing costs soaring, the younger generation faces an increasingly daunting challenge in envisioning the prospect of having their ‘own home.’ While in the past, saving money and transitioning from renting to homeownership was a natural progression, young households today grapple with accumulating enough funds for a more spacious and suitable residence. The traditional path to homeownership has become elusive.
