Presidents Park's government is grappling with how to fix the housing rental market in Korea.
The Joense system is unique to Korea and may I humbly suggest it is unique to Korea for a very good reason. It would be illegal in Australia and probably other countries as well, plus I give you my life savings, plus take a bank loan so I can live in your house. Why wouldn't I just buy my own place?
This is the problem tenants believed they were living rent free, landlords believed they were getting free money and at the end of the 2 year contract they would get a higher payment from the next tenant so they could spend the lump sum of cash and it worked beautifully where house prices were rising. Unfortunately due to inadequate immigration and a low birth rate, the population is stagnating.
The Fix
This is quite radical and will result in screams from many, but here goes. Introduce a maximum rental deposit of 2 months rent and deem monthly rent is being collected and make this deemed amount taxable income for property owners who aren't living in the property. Convert all Jeonse loans to mortgages and transfer all property ownership to the Jeonse holder. If there is a shortfall between the the Jeonse amount and the value of the property, then increase the mortgage loan limit to 80% and possibly allow mortgage insurance to cover up to 10% more.
To encourage people on the benefits of property ownership, remove all purchase taxes and fees for first home buyers of existing homes and possibly make a grant available to first home buyers. The reason for specifying existing homes is the government does not want to start another apartment building boom.
Finally change the taxation system to allow non-Koreans the same tax deductions on rent and mortgages that Korean citizens get. This primarily concerns households where a non-Korean man is married to a Korean woman and the man is the sole wage earner. He cannot be head of household because he isn't Korean and the wife (officially head of the household) doesn't have an income to claim a tax deduction on.
Obviously this needs more detail, but Jeonse has turned into a Ponzi scheme that could be hugely detrimental to the Korean economy if drastic measures aren't taken. It has the potential to make 1997 look like a mild cold.
Monday, 19 August 2013
Tuesday, 4 December 2012
Korea alleged to be ignoring CERD
I have been calling for equality of treatment for permanent residents in Korea and Koreans for some time now.
Korea thinks they can be a "Global Financial Centre" when their regulators are too busy coming up with stupid paperwork for a foreigner wanting an international check card, but failing to regulate savings banks?
Korea thinks they can attract "Global Talent" when they're signing up to be treated as potential criminals for their 2-3 year stay? After all the immigration department comes under the ministry of justice, who also run the prisons.
Korea calls Australians racist after 4 separate attacks on Koreans in Australia (disgusting though they are) despite the fact that 150,000 Koreans are living safely and happily in Australia, without needing special paperwork to get an international check card and if they have permanent residency being treated exactly the same as citizens with regards to access to credit and government services.
The only way that Korea is better for a permanent resident is that you can vote after 3 years but only in local elections, whereas in Australia you have full economic freedom as permanent resident, but voting is reserved for citizens.
Economic freedom or a vote, I know which I would rather have.
Saturday, 25 August 2012
Update on Car Loans
Do not borrow money where you buy the car is a rule that I was taught in Australia, however due to promotional offers of 3.9% I let my guard down and paid the penalty for it.
I had to pay a w650,000 application fee to get my low rate loan and I lost w500,000 of discount bringing the real rate I am paying to over 12%, and most of that was paid upfront.
Go to your bank and get an unsecured loan.
If you can't do that because your bank won't cooperate, change banks, but give up on the bank loan because a lot of credit enquiries will reduce your chances of getting the loan.
So if you still need a car, and you don't have the cash then you will have to get dealer finance here are my pointers.
1. You will need your spouse to guarantee your loan. Korean institutions haven't heard of The UN's Committee on the Elimination of Racial Discrimination's ruling of Habassi v. Denmark so unless you want to take up the fight, your spouse will have to sign.
2. If you can, choose a smaller town to buy your car, this means that the car dealer and the finance company people will know each other well. It may take time but if you form a relationship with the dealer, the dealer will take care of every stage where the finance company comes back with a reason not to make the loan.
3. Be patient, it will take time.
It may have been easier to put it in my wife's name, but as my wife is a homemaker, that wasn't an option either.
I had to pay a w650,000 application fee to get my low rate loan and I lost w500,000 of discount bringing the real rate I am paying to over 12%, and most of that was paid upfront.
Go to your bank and get an unsecured loan.
If you can't do that because your bank won't cooperate, change banks, but give up on the bank loan because a lot of credit enquiries will reduce your chances of getting the loan.
So if you still need a car, and you don't have the cash then you will have to get dealer finance here are my pointers.
1. You will need your spouse to guarantee your loan. Korean institutions haven't heard of The UN's Committee on the Elimination of Racial Discrimination's ruling of Habassi v. Denmark so unless you want to take up the fight, your spouse will have to sign.
2. If you can, choose a smaller town to buy your car, this means that the car dealer and the finance company people will know each other well. It may take time but if you form a relationship with the dealer, the dealer will take care of every stage where the finance company comes back with a reason not to make the loan.
3. Be patient, it will take time.
It may have been easier to put it in my wife's name, but as my wife is a homemaker, that wasn't an option either.
Monday, 7 November 2011
Bank Hours may vary on November 10th.
November 10th is the annual university entrance exam. Usually many companies that start at 9am change the time to 10am to reduce the traffic for students traveling to the exam.
Logging onto HSBC this morning there was an announcement stating branch hours would be 10am to 5pm this Thursday. I haven't seen anything on any of the other banks websites in English, but it's worth checking, and if you go to the bank early and they're closed, don't panic.
Logging onto HSBC this morning there was an announcement stating branch hours would be 10am to 5pm this Thursday. I haven't seen anything on any of the other banks websites in English, but it's worth checking, and if you go to the bank early and they're closed, don't panic.
Saturday, 5 November 2011
Is it time for the FSS to act on Credit Cards?
Many merchants in Korea are currently protesting about the high merchant fees they have to pay to accept credit cards. See this Koreatimes story. The government looks like it will do something, but what?
In Australia merchants are allowed to surcharge the customer for paying by card. In Korea many small merchants do this unofficially by telling the customer they can make a purchase VAT free if they pay by cash. I do not believe that surcharging is the answer, as many Australian businesses use surcharging as another cash grab Choice Australia survey of retailer surcharging margins. My problem with credit card surcharging is that it discriminates against one type of customer. As a former business owner I know that handling cash also has costs. You have your time to count the takings, the insurance for the cash, the time taking it to the bank or the cost of the security card to do that, and finally the risk to yourself and your employees of theft. I believe that taking cash is more expensive than taking credit cards so that surcharging is not the answer.
The credit card companies could take this opportunity to lower merchant fees and increase annual card fees. Unfortunately many Korean businesses still measure success on turnover rather than profitability. There would be pain as a number of Koreans may cancel some of the plastic they hold. This would probably make the Financial Supervisory Service (FSS) quite happy. I guess a minimum annual fee of w20,000 would be effective with no fee exemptions. Of course the credit card companies will never voluntarily do this and it would be a very courageous government that made a law increasing the price of everyone's credit cards.
Another solution would be to ban credit card points schemes. Why should I be rewarded for not using my money? Removing rewards schemes would allow merchant fees to drop significantly and is also probably the secret dream of every credit card company executive. But won't the children scream if we lose our candy. No credit card company will do this, and although there would be some short term pain for the government if they act, I believe it would be quickly forgotten.
Maybe I am being too negative, perhaps the credit card companies can see that they will be facing some frankly draconian regulations if they don't get their house in order, but I doubt they will act without significant government coercion.
In Australia merchants are allowed to surcharge the customer for paying by card. In Korea many small merchants do this unofficially by telling the customer they can make a purchase VAT free if they pay by cash. I do not believe that surcharging is the answer, as many Australian businesses use surcharging as another cash grab Choice Australia survey of retailer surcharging margins. My problem with credit card surcharging is that it discriminates against one type of customer. As a former business owner I know that handling cash also has costs. You have your time to count the takings, the insurance for the cash, the time taking it to the bank or the cost of the security card to do that, and finally the risk to yourself and your employees of theft. I believe that taking cash is more expensive than taking credit cards so that surcharging is not the answer.
The credit card companies could take this opportunity to lower merchant fees and increase annual card fees. Unfortunately many Korean businesses still measure success on turnover rather than profitability. There would be pain as a number of Koreans may cancel some of the plastic they hold. This would probably make the Financial Supervisory Service (FSS) quite happy. I guess a minimum annual fee of w20,000 would be effective with no fee exemptions. Of course the credit card companies will never voluntarily do this and it would be a very courageous government that made a law increasing the price of everyone's credit cards.
Another solution would be to ban credit card points schemes. Why should I be rewarded for not using my money? Removing rewards schemes would allow merchant fees to drop significantly and is also probably the secret dream of every credit card company executive. But won't the children scream if we lose our candy. No credit card company will do this, and although there would be some short term pain for the government if they act, I believe it would be quickly forgotten.
Maybe I am being too negative, perhaps the credit card companies can see that they will be facing some frankly draconian regulations if they don't get their house in order, but I doubt they will act without significant government coercion.
Friday, 28 October 2011
Are Korean Credit cards too expensive and too cheap?
Merchants in Korea are being screwed. Credit cards are very expensive to process here, about twice the cost of Australia and Australia is a lot larger country with far fewer people. These fees need to fall.
My credit cards are actually too cheap here. I have 2 visa cards at w5,000 per year of which one of the has the fee waved if you spend more than w1,000,000 a year (less than $1000) and my Diners Club card is w30,000 per year. All cards include rewards in either discounts or points. How can these cards be so cheap? A Diners Club card in Australia costs $135 plus $77 for rewards. In the USA a Diners Club card costs $75 and in the UK it costs 50 pounds. Perhaps an increase in fees could reduce the amount of plastic issued in Korea, however who would move first?
My credit cards are actually too cheap here. I have 2 visa cards at w5,000 per year of which one of the has the fee waved if you spend more than w1,000,000 a year (less than $1000) and my Diners Club card is w30,000 per year. All cards include rewards in either discounts or points. How can these cards be so cheap? A Diners Club card in Australia costs $135 plus $77 for rewards. In the USA a Diners Club card costs $75 and in the UK it costs 50 pounds. Perhaps an increase in fees could reduce the amount of plastic issued in Korea, however who would move first?
Car loans - Watch this space
If you like me are a foreigner in Korea, you may find it very difficult impossible to get a car loan. We are told we are a flight risk. We are told our Korean partner must guarantee the loan.
Today I have written to one of the capital companies asking if they were refusing loans based on race. If they don't answer or give an affirmative answer I will be filing a complaint against them with the National Human Rights Commission next Friday.
It's game on.
Today I have written to one of the capital companies asking if they were refusing loans based on race. If they don't answer or give an affirmative answer I will be filing a complaint against them with the National Human Rights Commission next Friday.
It's game on.
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