Why Will Koreans Struggle to Pay Rent?

 Across East Asia especially in Korea, China, and Japan housing markets are undergoing a significant transformation. Rising Price to Income Ratios (PIR) and Rent to Income Ratios (RIR) are making it increasingly difficult for younger generations to find stable and affordable housing. In Korea, the jeonse system has long served as a distinctive feature of the housing market, where tenants provide a large lump-sum deposit instead of paying monthly rent. Meanwhile, China and Japan never adopted such a model; both countries have traditionally relied on monthly rent, prioritizing liquidity and financial flexibility. Today, Korea appears to be gradually shifting in the same direction less as a matter of preference and more as a response to deeper economic and structural pressures.

 For years, jeonse made sense in a market where property prices were consistently rising.  To afford jeonse, many tenants have turned to bank loans, which in turn raises their RIR and financial risk. Landlords could leverage tenants’ deposits to finance additional property purchases with minimal personal capital, a strategy commonly known as “gap investing”. As long as real estate values kept climbing, both investors and tenants saw the system as beneficial. However, with the market becoming more volatile and interest rates steadily increasing, this investment model has grown far less reliable. PIR has soared while income growth remains sluggish. In contrast, monthly rent while still expensive feels more manageable and realistic for those just beginning their adult lives.

 In China, a jeonse like system never really took root. During the early 2020s, rapid housing price inflation combined with rising concerns about an overheated market led to a preference for flexible rental options.(통계-중국 망한이유 evergrande.) For young people unable to gather massive upfront deposits, monthly rent emerged as the only viable choice. Japan experienced a similar pattern, albeit much earlier. After its asset bubble collapsed in the early 1990s, the country entered a prolonged economic downturn known as the “Lost 30 Years,” marked by deflation and stagnant growth. In such an environment, a deposit based system like jeonse proved unsustainable. Declining property values, combined with weak investor confidence, made it increasingly risky for landlords to rely on large, unsecured deposits from tenants. Monthly rent, with its predictability and lower financial stakes, gradually became the standard.

 Among these three nations, Korea is the one that most deeply embedded Jeonse into both its housing and financial ecosystems. As a result, the current  work out of the system carries broader consequences. Korea now seems to be following a similar path to 다른 나라들(like 중,일). The jeonse model is not fundamentally flawed; it simply no longer aligns with today’s economic conditions. What once functioned well in a stable, high growth environment has become increasingly fragile in the face of price uncertainty and financial tightening. As public confidence in real estate investment wanes, more people are opting for what feels safer and more sustainable: monthly rent. Today, many young people find it nearly impossible to save the tens of millions of won needed for a jeonse deposit. Though banks offer loans, the pressure of repayment is immense. Imagine earning 2 million won a month while dedicating half of it to repaying a jeonse loan. That leaves barely enough for food, transportation, savings or even thinking about milestones like marriage or starting a family. This financial strain contributes directly to Korea’s low birth rate and a general sense of stagnation among its youth. Japan, too, experienced similar demographic challenges, although its rental system placed less financial burden on renters from the outset.

 Large scale players have begun to take notice of this trend. Hines, one of the world’s largest rental housing companies, recently entered Korea’s rental market. A move like this suggests that the shift away from jeonse is not temporary.It reflects a carefully considered, long term growth in the way housing is structured and consumed.

 Ultimately, this transition may point toward a healthier future. A housing system that doesn’t require enormous deposits just to secure a place to live could offer young people greater freedom, security, and possibility. If Korea can establish a fair and dependable monthly rent framework, the burden on its younger generation could ease, creating a more equitable and sustainable housing culture for years to come.