Summary: “(Several government agencies) audited 8,319 of the country’s total 9,009 apartment complexes with 300 or more households each. Auditors found faults, including missing cash-flow statements, accounting omissions, construction contract violations, maintenance fund misuse and superfluous utility charges, in the financial statements of 1,610 – 19.4 percent – of the apartment complexes inspected.”
So if you live in a big apartment complex, there’s a 20% chance that you are a part of a Ponzi scheme. Most landlords have to provide proof of their financial status and show that they’re investing properly, as required by the government. The problem I have with the apartment system is the large amount of money you have to put down. For a nice apartment, you are basically giving your life savings to a stranger and saying “Hope you don’t screw me over!” Secondly, if everyone in the apartment complex said “I’m leaving, I’ll take my money now,” then I guarantee that even the legit ones wouldn’t be able to do it. Occasionally, landlords go broke and squander their tenants’ money. In this case, their property is sold to someone else and the profits are used to reimburse tenants as much as they can…but imagine if you had given someone 200,000$ and you only got back 150,000$. This audit basically proves that there’s nothing that the government can do to protect your investment. Realistically, these people will not be charged with much. Even if they’re imprisoned, our president will probably pardon them since financially corrupt people really help out the Korean economy!
It would be impossible to audit all of the smaller apartments, but I would guess that the percentage of corruption would be significantly higher. For example, you can deduct your rent from your year-end taxes, but my landlord specifically told me that I can’t do it. Why? He’s not paying taxes on it and if the government found out, he’d be in trouble. I think it’s a lot easier for a small place like mine with only 12 rooms in the building (a total of 5,900$ a month in rent) to skirt certain legal/ethical concerns.
Apartments are always being built. For the most part, having constant building projects keeps blue collar workers employed, but at some point there are going to be more apartments than there are people and the extortionate prices aren’t going to make sense anymore. Economists say the bubble is going to burst any day now, but they’ve been saying it for 15 years or so. If you’re Korean and you have a job, you can borrow money from the bank for your deposit. You can borrow enough to not pay monthly rent and pay on the interest. It ends up being incredibly cheap (think 250$ a month). For some reason though, many Koreans don’t want to do this. They would rather risk their own money, because most of them don’t think it’s a risk at all. The current system stagnates spending by having hundreds of people give millions of dollars to a single individual, rather than allowing them to pay a reasonable deposit (first and last month?) and spend their money buying things that they really don’t need…but maybe I’m wrong. At least 20% of apartments are spending that money, so maybe it’s okay.