[The Public = Margarita Kichukova] One of the difficulties as a foreigner living in Korea is finding a place to live. If you have experienced searching for a place to live in, you have probably realized that Korea's real estate system is a lot different in comparison to most other countries. Nevertheless, finding a suitable accommodation is an essential matter for foreign students, office workers, and even tourists who come to Korea for longer trips.
The big difference that foreigners often feel when house hunting is the role of real estate agencies here. For example, in Germany and in other European countries, there are various ways to look for a place to live in such as newspaper advertisements, recommendations from friends, or browsing the Internet. In many cases, the rental contract is signed directly between the tenant and the landlord.
However, Korea is very different in that sense as nothing happens without the help of real estate agencies. If you consider renting a property, the easiest way to do so is by visiting a real estate agency in your preferred area to discuss your options based on your financial capabilities and lifestyle needs.
In addition, Seoul is a place with a booming real estate market where the constant cycle of selling, buying, reselling, and renting out properties is rather fast paced. That is why, it is important to keep in mind that most rent contracts are also signed quickly. In other words, hesitating even for a little while might cost you your dream accommodation. To secure a place that you like, be prepared to make a down payment of around 10% of the monthly rent which is a standard procedure before moving in. The remaining amount is to be paid on the date of signing the contract.
Finding a suitable accommodation in Korea can be a hassle. In Korea, where housing prices increase on the regular, it is not easy to prepare yourself for the reality of the market. That is why, understanding the basics of the local house rental systems should not be overlooked. Here are three valuable tips on how to begin your house-hunting in Korea.
1. Consider the length of your stay
People move to Korea for various reasons and this often determines the amount of time they are to spend in the country. For example, foreign students enrolled in Korean universities usually are expected to study here between two to four years, depending on their degree. On the other hand, those who come to Korea to study the language tend to spend one or two semesters in the country. Length of stay matters when considering suitable accommodation options mostly because of Korea's deposit-based property rental system. Namely, renting a place for more than a year allows you to deposit a large sum of money (around KRW 5-10 mln) which decreases the monthly rent. The reason why rent is cheaper that way is because the landlord receives the interest of the deposit money from the bank, thus benefitting both sides of the lease agreement.
2. Get to know the city
In Korea, the difference in standard of living between Seoul and the rest of the country is quite severe. The same applies to the various neighborhoods and regions within Seoul. Not to mention, the capital city is huge and, despite its high-functioning transportation system, commuting from point A to point B can sometimes take forever. That is why, it is important to research the area where your occupation is and try to find accommodation nearby. If that is not an option due to financial reasons, familiarizing yourself with the subway stations around your university or workplace should be your next priority. For example, Sillm (신림) station is a relatively cheaper region to live in which has excellent subway connection with some of Seoul's hot spots like Hongdae (홍대) or Gangnam (강남) as it is located on Subway Line 2.
3. Calculate your budget
Evaluating your financial situation prior to initiating the search for a new home is vital in any part of the world. In Korea, however, there are certain factors to consider in addition to rent prices that foreigners are sometimes unaware of. Besides the aforementioned deposit, another specific of the Korean housing rental system is the so-called "maintenance fee (관리비)". This fee is often between KRW 50,000-100,000 and it mostly covers general building expenses such as the elevator's electric consumption, etc.
This being said, it rarely includes the expenses of the actual apartment you are renting, although it may sometimes cover Internet or water charges. In addition to establishing how much the maintenance fee is and what does it cover, you might want to ask your landlord about how much you need to pay for bills beforehand. Since expenses nearly double in winter and in summer due to gas and AC consumption, you should inquire in detail about what to expect during these two seasons. Lastly, pay attention to any additional expenses mentioned in the lease contract such as cleaning fees upon moving out, repair fees, contract fee as well as late rent penalties.
4. Read the contract carefully
A rent contract regarding the property is signed by the tenant, the landlord and the realtor.
It includes the deposit, rent, date of moving in, and general rules.
In particular, it contains documents that show the landlord's financial status, which is especially important for the low income workers or high monthly rent contractors.
Realtor fees are also specified in the contract. The rate of this commission fee is determined according to the amount of the aforementioned transactions, and it usually varies between KRW 100,000-400,000. Of course, paying additional relator fees may feel burdensome, but they cover not only the services of the broker prior to moving in, but also the help the realtor provides with issues that may arise afterwards such as deposit security or repairs.
5. Key money rent (전세) vs. monthly rent (월세)
The reason why people rent a property through real estate agencies in Korea is the large deposits known as "key money", a rental system which is not common in other countries.
While in other places there are only the two options of renting or buying a house, Korea's key money practice can be considered as a mix between them. Renting a property this way means that you pay the landlord a significant portion of the actual sales price of the accommodation and get back the full amount upon moving out. The reason why this system is preferred despite the large monetary investment involved is that tenants do not pay rent during the lease period.
This system developed when Korea's interest rates were very high in the past, so landlords could earn more by depositing the key money in the bank rather than collecting actual rent.
However, it is important to know the landlord's financial status because a key money contract requires you to trust them with significant sums of money amounting to 60-70 percent of the current price of the leased property. Therefore, the role of real estate agencies is key if the landlord has no ability or willingness to return the money at the end of the contract.
On the other hand, Korea's monthly rent system is similar to that of other countries.
The difference is that deposits also tend to be higher than most places. For example, in Germany, a sum equal to the rent for one or two months is usually paid as a deposit, while in Korea, it is necessary to prepare between USD 10,000-50,000. The higher the deposit, the lower the rent. Therefore, if you have extra money, it is better to invest in a large deposit.
[Image by Pixabay]
The Public / Margarita Kichukova webmaster@thepublic.kr
더퍼블릭 / Margarita Kichukova webmaster@thepublic.kr