More teens buy apartments
Apartment complexes are seen from 63 Square in Yeouido, Seoul. (Yonhap)
A growing number of South Korean teenagers bought apartments in Seoul with financial support from their parents, data showed on July 19.
People in their teens bought a total of 69 new homes for speculative purposes in the January-May period, a tenfold increase from a year earlier, according to data from the Ministry of Land, Infrastructure and Transport submitted to Rep. Park Sang-hyuk of the ruling Democratic Party.
The young homeowners’ parents appeared to have handed cash to their children to purchase the apartments as part of a “gap investment” strategy, Park said.
This refers to a situation where a speculative buyer purchases a home occupied by a “jeonse” tenant, who pays a lump-sum deposit that must be refunded when the lease expires. With the tenant’s deposit, a gap investor can buy a home with a modest down payment consisting only of the difference between the price of the home and the amount of the deposit.
Nearly 88.4 percent of Seoul apartment purchase transactions undertaken by those under the age of 20 during the given period were part of a gap investment strategy, data showed, despite the Moon Jae-in administration’s 25th policy attempt to rein in property speculation that was announced in February.
The recent rise in the number of young homeowners came amid soaring demand for property, fueled by ample liquidity and record-low interest rates. In January home-buying sentiment reached 117.2, a record high since the compilation of relevant data started in July 2012, according to the Korea Appraisal Board. It had risen to 141.6 as of this past May, up 3.8 percentage points from the previous month.
The government’s tougher lending rules also prompted people to buy homes in their children’s names after inheriting financial assets, industry sources said.
Starting in June, people who own three or more homes face a property transfer tax amounting to 75 percent of their gains. Previously, the maximum was 65 percent.
By Choi Jae-hee (firstname.lastname@example.org)