24 Trillion Won Surge in One Month... Jeonse Loans Approaching 100 Trillion Won Era 'Countdown' (Comprehensive)

August 5 Major Banks Record 97.13 Trillion KRW... Increase of 2.4 Trillion KRW in One Month
'Transaction Volume Halved' but Deposit Amount Increased
Growth Expected to Continue Ahead of Fall Moving Season

[Asia Economy Reporter Kim Min-young] Last month, during the off-season for Jeonse rentals, major commercial banks saw an unusual surge in Jeonse loans. While Jeonse transaction volumes in Seoul and Gyeonggi Province were halved, only Jeonse loans increased, which is interpreted as tenants taking out more loans to cope with the recent sharp rise in Jeonse prices. The outstanding balance of Jeonse loans at major banks is on the verge of surpassing 100 trillion won for the first time in history.

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

Unusual Surge in August

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 disbursed when tenants pay the remaining Jeonse deposit and move in, so July and August, which include vacation season and the rainy season, are typically off-peak moving months. The peak seasons are considered to be 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 represents a 45.88% increase compared to the same period last year.

Jeonse Transaction Volume Plummets

On the other hand, Jeonse transaction volumes have sharply declined. According to the Seoul Real Estate Information Plaza, Jeonse transactions in Seoul last month totaled 6,078 cases, a 47.6% decrease compared to 11,600 cases in July. Transactions shrank to about half within one month. Although there is a possibility of increased transaction volume if reported within one month after moving, it is expected to record the lowest level ever.

During the same period, Jeonse transactions in Gyeonggi Province 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. Since 2011, the monthly volume of Jeonse and monthly rent transactions in Gyeonggi Province has never fallen below 13,000 cases.

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

The increase in Jeonse loans is expected to continue for the time being. A representative from Bank A said, "The recent rise in Jeonse prices is influenced by the increase in housing prices," adding, "Tenants are taking out additional loans due to the burden of deposits, and the fact that unsecured loans increased by more than 4 trillion won last month is also related to the rise in Jeonse and sale prices." An executive from Bank B also pointed out, "The fact that Jeonse loans increased while transaction volumes decreased is evidence that the average Jeonse deposit per person has significantly increased," and added, "Recent government real estate policies focus on controlling housing prices, but they are causing the side effect of rising Jeonse prices."

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