Q2 2015 Shows a Strong Housing Market in South Korea

The housing market in South Korea has shown strong signs of improvement in Q2 2015, thanks to the steady rise of prices and huge number of transactions. According to a statement from Korea Development Institute (KDI), the period has seen an increase of 39.1% at 340,743 transactions compared to last year's figures. This surge follows the on-year spike in the first quarter at 18.3%.

The report from KDI attributes the strong market to low interest rates combined with favorable rental terms - known as 'jeonse'.

It refers to the local property market's lease system, wherein tenants pay their landlord a hefty deposit rather than settle expensive rent every month. The arrangement is mostly beneficial to the owners, allowing them to generate high income. However, the amount is fully refundable when contract/lease ends, which is typically after two years. This means that tenants can still get their money if they decide to move out.

The average jeonse from April to June is 71.9% of property values, which is up by .9% from January to March. The strong market is mostly observed in the capital region, which includes Gyeonggi Province and Seoul - home to almost half of South Korea's 50 million people. Transactions around the area have increased by 64.3% at 179,902 compared to Q2 2014. It accounts for over 52% of the nation's total transactions in Q2 2015.

On the other hand, outstanding mortgage loans have risen to 478.3 trillion won, which is up by 8.4 trillion won from the previous quarter. According to a survey carried out among property market experts, these figures are predicted to continue increasing in the third quarter. And the key factor is low interest rate on monthly rent.