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Price gap widens between jeonse, apartment cost

Apartment complexes in Seoul. (Yonhap)
Apartment complexes in Seoul. (Yonhap)

The price gap between the average jeonse -- a real estate term unique to South Korea that refers to property lease -- and average sale price of apartments in Seoul reached a record high in February in seven years, increasing the financial burden on potential home buyers, according to latest data Thursday.

Jeonse refers to a two-year leasing system that requires tenants to pay a large deposit instead of monthly rent.

The average jeonse price amounted to 55.6 percent of the average apartment price, the lowest since January 2013, when the figure dropped to 55.2 percent, according to the report published by commercial bank KB Kookmin Bank, which provides real estate information via its online platform Liiv On.

The widening gap was attributed to a relatively drastic jump in the purchase price, up 0.51 percent this month, while the jeonse price increased 0.26 percent, the bank said.

The median apartment price in Seoul this month came in at 947.98 million won ($780,000), up 3.93 percent on-month. The median jeonse price stood at 440.7 million won, up just 0.3 percent on-month.

The difference hovered below 50 percent in Yongsan-gu, Gangnam-gu, Songpa-gu and Yongdeungpo-gu, most of which are considered downtown areas. It stayed above 60 percent in Joongrang-gu, Joong-gu, Gangbuk-gu, Gwanak-gu and Jongno-gu.

Jeonse is popular, as the deposit is relatively cheaper than the cost of buying a house with no monthly rent. On the other hand, it is often used as leverage by home owners to acquire additional properties or other investment opportunities.

The gap between jeonse and purchase price nationwide stood at 69.8 percent this month, down from 70 percent in January. It was the first time the difference has dropped below 70 percent since November 2014.

By Kim Young-won (