Sharp Rise in Jeonse Prices Leads to 2.4 Trillion KRW Increase in Bank Jeonse Loans in August... Unusual Surge in Off-Season

August 5 Major Banks Record 97.13 Trillion KRW... Surge of 2.4 Trillion KRW in One Month
Largest Increase Since 2.65 Trillion KRW in February This Year
‘Transaction Volume Halved’ but Deposit Rise... Increase Expected to Continue Ahead of Fall Moving Season

[Asia Economy Reporter Kim Min-young] Last month, jeonse loans from major commercial banks surged by more than 2 trillion won in just one month. This is an unusual increase during the off-season for jeonse, the vacation period. While the volume of jeonse transactions in the Seoul metropolitan area, including Seoul and Gyeonggi, has halved, cases of increased jeonse prices at the time of new contracts have risen, leading tenants to take out jeonse loans to cope with the burden. With the autumn moving season approaching, there are forecasts that jeonse loans will soon surpass 100 trillion won for the first time in history as jeonse prices may rise further.

According to the banking sector on the 7th, the outstanding balance of jeonse loans from the five major banks?Shinhan, KB Kookmin, Hana, Woori, and NH Nonghyup?was recorded at 97.1303 trillion won at the end of last month. This is an increase of 2.4007 trillion won compared to July (94.7296 trillion won). The monthly net increase in jeonse loans this year peaked after rising by 2.6514 trillion won from 82.7533 trillion won in January to 85.4047 trillion won in February, then showed a downward trend.

After hitting a low of 1.4275 trillion won in May, the net increase rose monthly to 1.7374 trillion won in June, 1.9923 trillion won in July, and 2.4007 trillion won in August. Last month's net increase was the second-largest this year.

Jeonse loans are made when tenants pay the remaining jeonse deposit and move in, so July and August, which are vacation and rainy seasons, are generally considered off-peak moving months. The peak seasons are January to February and September to November, ahead of the new school term.

This year, despite low moving demand in July and August due to the resurgence of COVID-19 and consecutive typhoons, jeonse loans surged by more than 2 trillion won last month. In August last year, jeonse loans increased by 1.6456 trillion won. This is a 45.88% increase compared to the same period last year.

On the other hand, the volume of jeonse transactions is sharply declining. According to the Seoul Real Estate Information Plaza, the volume of jeonse transactions in Seoul last month was 6,078 cases, a 47.6% decrease compared to 11,600 cases in July. The volume shrank to about half in just one month. Although there is a possibility of an increase if transactions are reported within one month after moving, it is expected to record the lowest level ever.

During the same period, the volume of jeonse transactions in the Gyeonggi area also dropped by 52.2%, from 17,065 cases to 8,154 cases. Last month's transaction volume in Gyeonggi Province is also at an all-time low. The monthly volume of jeonse and wolse (monthly rent) transactions in Gyeonggi has never fallen below 13,000 cases since 2011.

Experts interpret the increase in jeonse loan balances despite the halving of transaction volume as a recent sign that the jeonse deposit per person has significantly increased. Previously, tenants could renew contracts or move elsewhere by combining the existing jeonse loan with savings accumulated over two years or by slightly increasing the loan amount, but recently, with the sharp rise in jeonse prices, they have no choice but to take out larger loans.

A bank A official said, "The recent rise in housing prices has led to a simultaneous increase in jeonse prices," adding, "Tenants are taking out additional loans due to the burden of deposits, and the increase of more than 4 trillion won in unsecured loans last month is also related to the rise in jeonse and sale prices." A bank B executive also pointed out, "The fact that jeonse loans increased despite a decrease in transaction volume is evidence that the jeonse deposit per person has significantly increased," and criticized, "Recent government real estate policies focus on controlling housing prices but are causing side effects of rising jeonse prices."

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