Government Mentions Additional Measures but Has No Clever Solution... Market Leaders Say "Please Just Stay Still"

Spread of Jeonse Shortage... Hong Nam-ki Mentions Additional Measures
No Suitable Measures... No Good Solutions Expected
House Prices Rise and Side Effects Occur Whenever Measures Are Announced
Market Says "Please Do Nothing"

Deputy Prime Minister for Economy Hong Nam-ki appeared at the National Assembly's Planning and Finance Committee hearing on the Ministry of Economy and Finance on the 8th, responding to lawmakers' questions. Photo by Yoon Dong-ju doso7@

[Asia Economy Reporter Moon Jiwon] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, said he would devise additional measures to stabilize the jeonse market, but both the government and the market are diagnosing that there is no suitable solution. Although rent subsidies or regulations on jeonse and monthly rent prices are being discussed, there is a high possibility that they will cause further side effects without effectiveness.

According to sources inside and outside the government on the 13th, Deputy Prime Minister Hong held an expanded executive meeting via video conference at the Government Seoul Office Building the day before, instructing to strengthen monitoring of volume and prices in the jeonse and monthly rent market and to devise additional measures. This is an extension of his statement on the 8th at the National Assembly’s Planning and Finance Committee audit, where he said, "We will consider additional measures."

The government is expected to discuss countermeasures against the jeonse shortage at the real estate market inspection meeting of related ministers scheduled for the 14th. However, the prevailing opinion is that there is no effective solution for stabilizing the jeonse market, both in the market and within related ministries.

A Ministry of Land, Infrastructure and Transport official said, "Deputy Prime Minister Hong’s remarks are understood as a general response made at the audit, and currently, there is no specific task being discussed with the Ministry of Economy and Finance," adding, "We are closely monitoring the market situation, but it is difficult for the Ministry of Land, Infrastructure and Transport to come up with major measures immediately."

The industry views three main possible measures to stabilize the rental market: 'supply expansion measures' such as increasing quality rental housing or converting vacancies into rentals; 'rent subsidy measures' such as expanding low-interest jeonse loans; and 'market regulations' such as strengthening the right to request contract renewal, tightening the jeonse-to-monthly rent conversion rate, and introducing a standard rent system.

Among these, supply expansion is unlikely to show immediate effects, and rent subsidies are limited in their price stabilization effect because they only help tenants meet the prices landlords want.

Rental market regulations have a direct short-term impact on the market but carry a high risk of adverse effects. In fact, after the government recently implemented the two rental laws including the jeonse and monthly rent cap system and lowered the jeonse-to-monthly rent conversion rate from the existing 4.0% to 2.5%, a shortage of jeonse listings and a rapid price surge phenomenon have spread.

The standard rent system is also a difficult card to play easily. It can only be considered after sufficient rent information is accumulated following the implementation of the jeonse and monthly rent reporting system in June next year. It is expected to take considerable time to calculate appropriate rents by housing type and region and to gather market opinions.

In the market, there is a tense atmosphere regarding whether and how strongly additional measures will be taken, as previous government policies have repeatedly caused side effects such as sharp rises in sales and jeonse prices. On real estate-related online cafes, complaints such as "For market stability, the government should do nothing" are rampant.

Ham Young-jin, head of the Zigbang Big Data Lab, said, "It will be difficult to find a good short-term solution to stabilize the jeonse market," adding, "Policies pushed through by law can disrupt the market, so careful consideration is needed."

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