When searching for an apartment, you’ll notice that the housing rental system in Korea is quite different than in your home country. Different vocabulary and options are available for an apartment in Korea. Specifically, two words keep popping up: Jeonse and wolse. What do they mean, and which one is better?
Jeonse is a term used to describe the agreement between a renter and a landlord where the renter pays a large deposit (보증금 or bojeongeum) to the landlord in order to live in the house rent-free. Contracts typically range from 2-3 years, and the full bojeongeum amount is returned to the lessee at the end of the contract period. An apartment in Korea using the jeonse system will usually be approximately 40 – 90% of the market value. For example, if the market price for a studio apartment 100,000,000 won, then the bojeongeum amount will be:
(100,000,000 won) x (.40 – .90) = 40,000,000 – 90,000,000 won
This amount will vary based on the area, the quality of the unit, and the furnishings included. Once you enter into a jeonse contract, the landlord is free to use your bojeongeum for other investments as long as it is returned to you in full at the end of the contract. This is generally a safe process as long as you do your due diligence. Make sure you check that there are no unpaid loans on the building before you authorize the agreement.
Wolse is used to describe the rental system in Korea that is more similar to the West. It is like jeonse, except that the bojeongeum amount is significantly smaller and a monthly rent is also paid to the landlord. The contract period is generally 1-2 years and the full bojeongeum is returned at the end of the contract. An apartment in Korea using the wolse system will usually be about 1% of the jeonse amount. For example, if a studio requires an 80,000,000 jeonse deposit, the wolse monthly rent will be:
(80,000,000 won) x (.01) = 800,000 won per month (no bojeongeum)
Landlords typically want some kind of bojeongeum, even with the wolse system. This amount is often between 5,000,000 – 20,000,000 won, depending on a number of factors. 5,000,000 won in bojeongeum is equal to 50,000 won per month in rent. So given the above scenario, the same studio at 800,000 won per month can also be had with a 10,000,000 won bojeongeum deposit:
800,000 won per month = (700,000 won per month) + (10,000,000 won bojeongeum)
The deposit amount can often be negotiated, but that is at the discretion of the landlord. Recently landlords have been favoring monthly rents instead of a higher bojeongeum, but this will vary.
So which one is better? There is no clear answer, especially with the recent changes in the Korean housing market. Interest rates are a record lows, and there is a lack of confidence that housing values will continue to rise. People’s preferences with respect to the rental system in Korea are clearly changing. Fewer jeonse units are available since landlords would prefer to receive a steady monthly rent instead of the lower amount earned from interest rates. An unsteady housing market in Korea is encouraging people and families to stick with jeonse instead of being locked into a mortgage on an apartment that may decrease in value. Many expats in Korea don’t arrive here with a large pile of cash ready to hand over to a building owner, so for those people wolse is a good option. Also wolse contracts tend to be for shorter periods of time, which allows for greater flexibility if you aren’t sure where you’ll be in the next 2-3 years.
If you are uncertain about which way to go regarding the rental system in Korea, you need to gather more information. Do your research and make sure you fully understand the pros and cons of each option.
One action that can help you make this decision is to get out there and see some apartments for yourself. This step alone may make the decision clear since you’ll see what you can get for your money. There are real estate offices (부동산 or budongsan) in every neighborhood in Korea, so pop in and pay them a visit.
If you don’t speak Korean or need some useful vocabulary, you can download our free quick start guide here to get you moving as quickly as possible. Map out a few areas that you would like to consider living in, prepare a rough overview of the kind of apartment in Korea you are looking for, and pay the budongsan a visit. You don’t always need an appointment and they’re usually quite friendly. Even if you don’t speak Korean, it’s good to head in there with at least a few key Korean vocabulary words. If you make the effort to learn a few Korean words and phrases, they will usually reciprocate in English even if they’re not confident speakers.
Best of luck!