Is the Jeonse Housing Shortage Caused by the 'Lease Protection Act'?…Seoul Jeonse Prices Up 7.5% in 3 Months

Price Increase Over Five Times Last Year's Annual Rise
Government Claims Low Interest Rates Cause Jeonse Crisis
Market and Statistics Show Clear Policy Side Effects

[Asia Economy Reporter Moon Jiwon] According to a survey, the average jeonse (long-term lease) price for apartments in Seoul surged by 37.55 million KRW (7.5%) over three months following the implementation of the two major rental laws: the Jeonse Price Cap System and the Lease Renewal Request Right System. This increase is equivalent to the total rise over the previous one year and nine months. While the government maintains that the low-interest-rate policy of the Bank of Korea is the main cause of the jeonse price hike, industry experts argue that statistics clearly show the 'two rental laws' as the root cause of the jeonse shortage.

According to the monthly KB Housing Price Trend data from KB Kookmin Bank's Real Estate Live On on the 2nd, the average jeonse price for apartments in Seoul last month was 536.77 million KRW. Considering it was 499.22 million KRW in July, this represents a sharp increase of about 37.55 million KRW (7.5%) in just three months. This amount is more than five times the average jeonse price increase of 7.18 million KRW throughout 2019.

Notably, the three-month increase rate recently nearly reached half of the 16.3% rise over the past two years. Considering the average jeonse price rose by about 75 million KRW over the last two years, the increase in the recent three months almost matches the rise during the previous one year and nine months.

The median jeonse price for Seoul apartments also surpassed 500 million KRW for the first time. Last month, it surged to 508.04 million KRW, nearly 40 million KRW higher than the previous month's 468.33 million KRW. Since the median price represents the middle value when housing prices are arranged in order, it is more suitable for understanding general housing market trends. The head of a real estate agency in Seodaemun-gu, A, said, "Recently, jeonse prices for older apartments have also risen significantly, making it difficult to find jeonse in the 300 to 400 million KRW range within Seoul."

The shortage of jeonse supply also shows little sign of easing. Last month, Seoul's KB Jeonse Supply-Demand Index was 191.8, up 2.4 points from 189.3 the previous month. This is the highest figure in five years since October 2015 (193.8). This index ranges from 0 to 200, with values above 100 indicating a higher proportion of 'supply shortage.'

The Jeonse Outlook Index, predicted by frontline real estate agencies, also rose by 23 points from 118 in January to 141 in October. This index similarly indicates a higher likelihood of jeonse price increases when exceeding 100.

Based on an 86.8㎡ (exclusive area) apartment, the district with the steepest jeonse price increase in Seoul was Geumcheon-gu, which jumped 11.0% (36.4 million KRW) over three months. It was followed by Seongdong-gu at 10.9%, Eunpyeong-gu at 10.3%, and Gangdong-gu at 10.2%. This recent rise in jeonse prices is concentrated in mid- to low-priced complexes.

However, compared to two years ago, which is the typical jeonse contract period, Gangnam-gu showed the highest price increase rate at 20.4% (153.63 million KRW). To secure an 86.8㎡ apartment on jeonse in Gangnam-gu, an average of 907.86 million KRW was required. Seocho-gu followed with 832.40 million KRW.

Earlier, the Ministry of Land, Infrastructure and Transport tried to avoid responsibility by attributing the spread of the jeonse shortage to the Bank of Korea's base rate cuts rather than the two rental laws. However, statistics show that jeonse instability has worsened from August to October after the implementation of the rental laws at the end of July.

The Korea Real Estate Board also explained on the same day that "amid the effects of the implementation of the two rental laws and strengthened residency requirements for market stabilization, jeonse prices rose mainly in mid- to low-priced areas of Seoul and regions with good school districts and transportation conditions."

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