Increasing Instability in Sales and Jeonse... 'Government' Without Measures, Ruling Party Adding Fuel to the Fire

Jeonse Crisis Drives Up Housing Prices, Worsening Residential Instability
Deputy Prime Minister Hong Nam-ki Admits No Sharp Measures
Democratic Party Proposes '3+3' New Lease Law
Jeonse Crisis Deepens Amid Strengthened Regulations... Controversy

Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki is listening to questions about the budget proposal at the plenary meeting of the Special Committee on Budget and Accounts held at the National Assembly on the morning of the 4th. (Photo by Yonhap News)

[Asia Economy Reporter Moon Jiwon] Since the implementation of the new lease law, the surge in jeonse (long-term deposit lease) prices has driven up the prices of mid- to low-priced apartments, further destabilizing the living conditions of ordinary citizens. Although the government is reviewing 'additional measures,' concerns are rising that the unstable atmosphere in the sales and jeonse markets will continue into next year, as even Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki admitted there are no suitable solutions.

According to the weekly apartment price trend data from the Korea Real Estate Board as of the 2nd, apartment prices nationwide rose by 0.17%, an increase from last week's 0.13%. Seoul apartment prices, which had shown a 0.01% increase over the past 10 weeks, rose by 0.02% this week. Additionally, prices in Gyeonggi Province (0.16%→0.23%), Incheon (0.12%→0.15%), and the five major metropolitan cities (0.24%→0.29%) also increased across most regions nationwide.

Despite the government announcing multiple measures to stabilize housing prices, the market has yet to regain stability. Industry insiders believe that the jeonse shortage, which spread after the new lease law including the rent ceiling and contract renewal request rights came into effect at the end of July, has driven up housing prices. There is a growing perception that it is better to buy an apartment now than to pay a high deposit for jeonse.

In Seoul, apartment prices rose more in areas with clusters of mid- to low-priced complexes rather than in the Gangnam area. Due to a decline in asking prices for high-end reconstruction complexes, Gangnam-gu (-0.01%) saw apartment prices turn negative, and Seocho and Gangdong-gu (0.00%) remained flat, but Jungnang-gu (0.08%), Nowon-gu (0.03%), Gwanak-gu (0.03%), and Geumcheon-gu (0.02%) saw relatively larger increases.

The problem is that the real estate markets in the metropolitan area outside Seoul and in provincial areas are also becoming increasingly unstable. In particular, apartment prices in non-regulated areas such as Gimpo in Gyeonggi Province, Busan, Ulsan, and Daegu are rising sharply. According to housing price increase data over the past three months, apartment prices in Busan's Haeundae-gu (4.94%), Suyeong-gu (2.65%), Dongnae-gu (2.58%), Chungnam's Gyeryong (3.34%), and Cheonan's Seobuk-gu (2.78%) have risen significantly.

These areas have avoided government designation as regulated zones. Unlike Seoul and other parts of Gyeonggi Province, they have fewer regulations, making investment easier, and with recent jeonse price increases, real demand has also grown, showing signs of overheating. The government plans to strengthen monitoring in areas where overheating worsens and is considering additional designation of regulated areas, but given the already sharp rise in housing prices, it will be difficult to avoid criticism of harming real demanders and of 'belated measures.'

The government is also preparing joint measures with related ministries regarding the jeonse shortage, but analysis suggests this is not easy either. Deputy Prime Minister Hong Nam-ki said at the National Assembly audit on the 8th of last month, "Jeonse prices do not seem likely to fall easily," and "We will consider additional measures," but there has been no news so far. Rather, at the National Assembly Planning and Finance Committee the day before, Hong admitted there is no sharp solution, saying, "If there were definite measures, the government would have announced them."

Many analyses suggest market instability may continue until next year. The nationwide apartment move-in volume scheduled for next year is 265,594 households, a 26.5% decrease compared to this year's expected volume, and Seoul's is expected to be 26,940 households, about half of this year's 48,758 households. There are also concerns that with the government's public price realization roadmap, apartment official prices will rise from next year, leading landlords to pass some of the tax burden onto tenants.

Amid growing instability in the real estate market, Park Kwang-on, a member of the Democratic Party of Korea, has instead proposed an amendment to the Housing Lease Protection Act to extend the tenant's residence period from the current 4 years to 6 years. The amendment would extend the lease guarantee period to 3 years and the subsequent contract renewal period also to 3 years, allowing tenants to reside for up to 6 years.

The rationale is that since Korea's school system consists of 6 years of elementary and 6 years of middle and high school, the lease period should also be aligned to 6 years. However, given the recent spread of the jeonse shortage following the implementation of the 2+2 year lease law, many argue that strengthening the law further is inappropriate. A representative from Park Kwang-on's office explained amid controversy, "The intention is not to pass the bill immediately but to discuss this direction once the market stabilizes to some extent."

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