Government Trying to Control 'House Prices' Ends Up Hurting 'Somin'... Growing Potential Risks

Sharp Rise in Jeonse Prices... Housing Costs Increase and Jeonse Accident Risk Rises
Household Debt 'Jeonse Deposit' Increases, Burdening National Economy
Lack of Statistics Prevents Even Estimation of Deposit Scale
Income-Led Growth Committee Orders Study... Need for Countermeasures

[Asia Economy Reporter Moon Jiwon] The government's measures to stabilize the real estate market are instead threatening the housing stability of ordinary citizens. Since the implementation of the 'Lease 2 Acts,' jeonse prices have soared, increasing the burden of housing costs and raising the risk of rental accidents due to 'Kkangtong houses' (houses where landlords cannot return the deposit). There are also concerns that the rapid increase in household debt could negatively impact the economy and financial markets.

According to the real estate industry on the 8th, after the implementation of the Lease 2 Acts, including the right to request contract renewal and the rent ceiling system at the end of July, jeonse prices surged, exposing tenants in the outskirts more to risks than those in central areas such as Gangnam in Seoul.

In particular, as the gap between sale and jeonse prices narrows, the possibility of 'Kkangtong houses,' where landlords cannot return deposits to tenants, is increasing more in the outskirts of the metropolitan area and provinces. If jeonse prices continue to rise while sale prices enter an adjustment phase, jeonse deposit accidents are more likely to occur in outskirts where sale price increases have been weak.

In recent years, 'gap investment,' where people purchase houses with jeonse deposits, has become popular domestically, leading to a surge in rental accidents. According to the Ministry of Land, Infrastructure and Transport and the Housing and Urban Guarantee Corporation (HUG), from 2017 to June this year, the top 30 landlords who failed to return deposits to tenants have embezzled a total of 109.6 billion KRW.

Experts point out that such jeonse deposit accidents are more likely to occur in multi-family and row houses than in apartments, and more in outskirts or provinces than in downtown Seoul. Looking at the jeonse price ratio from the Korea Real Estate Board, which can gauge accident risk, as of last month, Seoul apartments stood at 57.5%, while row houses were at 71.7%. Among apartments, the ratio was higher in northern Seoul (59.5%) than in Gangnam (55.7%), and it reached 74.7% in provinces.

Actual deposit accidents also mainly occurred in the outskirts of Seoul and provinces. Looking at the 'Top 30 landlords with jeonse deposit accidents,' large-scale accidents occurred frequently in areas such as Gangseo, Gwanak, Yangcheon districts, Yesan County in Chungnam, Seo District in Incheon, Gyeongsan in Gyeongbuk, and Cheonan in Chungnam, excluding Gangnam and Mapo districts in Seoul. The government's real estate measures, initiated to curb apartment prices in Gangnam, have only increased the burden on ordinary citizens.

Additionally, the rapid rise in jeonse prices has led to increased housing costs and household debt among ordinary citizens. According to data obtained by Democratic Party lawmaker Ko Yong-jin from the Bank of Korea, personal guarantees, including jeonse loans, increased by 23.8 trillion KRW in the first half of this year alone.

Although there are concerns that instability in the jeonse market could expand risks across the economy, the government currently does not even properly grasp the scale or trends of jeonse and monthly rental deposits, which have the nature of household debt. Unlike sales, leases are not subject to mandatory reporting, so statistical data can only be collected through confirmed date reports and similar sources. There are no proper statistics even from the Korea Real Estate Board for monthly rent or semi-monthly rent, which are not jeonse.

The jeonse and monthly rent reporting system will be implemented from June next year, but it is expected that it will take at least until 2023 to build a macro statistical system through this. A Korea Real Estate Board official said, "It is realistically difficult to grasp the current scale of jeonse and monthly rent deposits," adding, "Even with the reporting system introduced, it will take at least two years for statistics to accumulate."

As a result, it is not easy for the government to analyze potential risks arising from rising jeonse prices or to prepare detailed measures. In response, the Special Committee on Income-Led Growth under the Presidential Policy Planning Committee (hereinafter Sojusung Special Committee) has recently commissioned a project aimed at estimating the scale of domestic housing jeonse and monthly rent deposits.

A Sojusung Special Committee official said, "Since deposits also have a debt-like nature, excessive increases in jeonse prices can affect the stability of the entire financial system and economic growth rate," adding, "For long-term housing policy formulation, it is necessary to build comprehensive statistical data, so after conducting a basic survey, we will also seek policy measures to strengthen the stability of the real estate market."

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