You know what I always say – knowledge and education is everything when you’re an investor.
So in the interests of expanding your knowledge (and giving you a compelling piece of trivia to bring up at your next dinner party!), I thought I’d share a recently discovery about South Korea’s extraordinary property market!
You see, South Korea’s property market is booming, for quite a unique recent. Once you get to the end of this story, you’ll understand why mortgage loans in the nation have jumped a healthy 10 per cent in 12 months.
South Korea’s rental market operates under the distinctive ‘jeonse’ system, wherein tenants pay a large rental deposit to rent a home for a basic period of two years.
At the conclusion of the rental agreement, the landlord must return the whole deposit. They do not charge a monthly rental amount.
And get this: The value of the rental deposit is usually worth more than half the home’s value.
So if the home is worth $300,000, the jeonse could be up to $150,000.
And recently, in some cities, jeonse have risen to near or level with the purchase price of the home being rented!
This sharp rise in the cost of jeonse, together with falling mortgage interest rates, has prompted tenants to consider buying homes instead of renewing rental contracts.
It is certainly an interesting way of doing things… And I have to admit, it offers quite a compelling incentive for residents to buy a home.
What do you think – could this type of system work in Australia? I have no idea how it would impact your tax return, but it sure would be nice as a landlord to receive a few hundred thousand dollars upfront, instead of a few grand a month…
Til next time, happy investing!