"Landlord's Word is Law"...Jeonse Refugees Increase While Government Offers 'Rosy Outlook'

Severe Turmoil in Jeonse and Wolse Market Amid Successive Regulations
Increase in Jeonse to Banjeonse Raises Deposits Significantly
Jeonse Price Growth Rate Declines but Simple Statistics Are Unreliable
Recent Years' Sharp Rise... Even Slight Drop Still Hard for Ordinary People

Seoul Mokdong real estate agency scene. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Moon Jiwon] Mr. A, a man in his 30s who is looking for a jeonse (long-term lease) apartment in Seoul ahead of his wedding early next year, has recently been sighing more due to the deposit rising by tens of millions of won. His subscription points are far from sufficient, and with the money he has saved so far, buying a home is difficult, so he decided to secure a jeonse apartment first, but even that is not easy.

Mr. A said, "An apartment in Hongje-dong, Seodaemun-gu, was reasonably priced, so I asked the agent to show me the house, but I was told it was just contracted," adding, "My funds are tight, but the jeonse deposit is rising and there are no listings, so I am very worried."

"The landlord sets the price"... Reluctantly signing monthly rent contracts

Since the implementation of the Jeonse and Monthly Rent Cap System and the Lease Renewal Request Right System, the jeonse and monthly rent market has been fluctuating. As tenants' rights have been strengthened and homeowners' tax burdens have increased, more landlords are converting jeonse contracts into semi-jeonse or raising the jeonse deposit in advance. Due to the jeonse shortage phenomenon, deposits have skyrocketed. Frontline agents say, "There are people looking, but no listings. The landlord sets the price."

According to the industry, Helio City in Garak-dong, Songpa-gu, where 9,510 households reside, currently has only about 10 jeonse listings, and Parkrio in Sincheon-dong, Songpa-gu, with 6,864 households, is in a situation where it is difficult to even find jeonse properties. According to statistics from the real estate big data company 'Asil' (Apartment Actual Transaction Price), the number of jeonse listings in Songpa-gu was 4,711 before the announcement of the July 10 measures but has decreased by 40.9% to 2,788 currently.

During the same period, the number of jeonse listings also sharply decreased in Jungnang-gu (-65.0%), Eunpyeong-gu (-63.2%), Guro-gu (-51.3%), and Yangcheon-gu (-47.5%). Additionally, major areas in Gyeonggi Province such as Suji-gu in Yongin-si (-52.3%), Osan-si (-50.3%), Uiwang-si (-49.1%), and Bucheon-si (-47.5%) also saw significant decreases in listings.

With high sale prices and fewer jeonse listings, tenants are reluctantly signing monthly rent contracts or agreeing to significantly increased deposits to secure jeonse contracts.

Minister Kim Hyun-mi of the Ministry of Land, Infrastructure and Transport is briefing on April 4th at the Government Seoul Office in Jongno-gu, Seoul, about plans to expand housing supply in the Seoul metropolitan area and surrounding regions. Photo by Kang Jin-hyung aymsdream@

The government and ruling party's rosy future: "Jeonse and monthly rent market to stabilize by year-end"

Although the confusion in the jeonse and monthly rent market is worsening, the government and ruling party expect it to stabilize by the end of the year at the latest. The Ministry of Land, Infrastructure and Transport recently stated, "There may be some impact such as the weekly jeonse price fluctuation rate in Seoul rising due to regulatory avoidance before the implementation of the Lease Protection Act," but added, "As the system settles after the law's implementation, it is expected to gradually stabilize."

Kim Tae-nyeon, floor leader of the Democratic Party of Korea, also emphasized, "The jeonse and monthly rent market will stabilize by the end of the year." Considering that about 110,000 households in the metropolitan area and 23,000 households in Seoul are scheduled to move in during the second half of the year, it is difficult for landlords to keep raising rents indefinitely.

In particular, the government expects that since the proportion of 'gap investment'?buying apartments with jeonse deposits?in the metropolitan area is high, cases where landlords return the jeonse deposit to tenants and convert jeonse contracts to monthly rent contracts will not surge rapidly in a short period.

According to the weekly apartment price trend survey by the Korea Real Estate Board, the rate of increase in jeonse prices in Seoul showed some signs of slowing this week. The jeonse price of Seoul apartments rose by 0.14% compared to 0.17% the previous week, reducing the rate of increase. This contrasts with the recent two weeks' sharp rises of 0.12% → 0.14% → 0.17%.

The Korea Real Estate Board analyzed, "The upward trend continued mainly in areas with good subway access and school districts, but due to seasonal off-season and the rainy season, some demand decreased, reducing the rate of increase." In the 'Gangnam 4 districts,' the rate of increase slowed compared to the previous week: Gangnam-gu 0.30% → 0.21%, Seocho-gu 0.28% → 0.20%, Songpa-gu 0.30% → 0.22%, Gangdong-gu 0.31% → 0.24%.

Real estate statistics vary: "Can we trust market stabilization?"

However, there are many criticisms that it is difficult to say the Seoul jeonse and monthly rent market is stabilizing based solely on simple statistics. While the Korea Real Estate Board's survey showed the jeonse price increase rate in Seoul shrinking from 0.17% to 0.14%, a private institution, KB Kookmin Bank, reported a sharp rise from 0.21% to 0.41%. Even though both are real estate-related statistics, the results vary depending on the sample and survey method, making it difficult to judge the market situation based on a single statistic.

There are also many criticisms that a slight decrease has little impact on ordinary people since jeonse prices have risen significantly in recent years. According to KB Kookmin Bank's monthly KB Housing Price Trend data, the average jeonse price of Seoul apartments last month was 499.22 million won, nearly surpassing 500 million won. This is an increase of 48.76 million won (10.8%) compared to July 2018, two years ago, when it was 450.46 million won.

This content was produced with the assistance of AI translation services.