'Oljeonse' Disappearing... 'Banjeonse' Increasing After New Lease Law

Last Month's Seoul Apartment Jeonse Transactions Account for 61.5% of Monthly Rent Deals
Lowest This Year... Second Lowest Since 2011
Increase in Semi-Jeonse and Semi-Monthly Rent Shares After New Lease Law Implementation
Supply Shrinks as More Landlords Live in Their Own Homes Due to Stricter Regulations

View of Gangbuk Apartments from Namsan [Image source=Yonhap News]

[Asia Economy Reporter Onyu Lim] The Jeonse (long-term lease) system is disappearing. Since the new Housing Lease Protection Act was implemented in July, the shift from Jeonse to Ban-jeonse (semi-Jeonse) has accelerated, causing the proportion of Jeonse transactions among apartment leases in Seoul last month to hit the lowest point this year. Due to the exhaustion of new Jeonse listings caused by the lease renewal right system and the increase in multi-homeowners converting Jeonse to monthly rent to cope with rising property taxes, concerns are growing that tenants' housing burdens will intensify.

According to the Seoul Real Estate Information Plaza on the 10th, out of 8,691 apartment lease transactions in Seoul last month, 5,345 were Jeonse, accounting for 61.5%. This is the lowest proportion so far this year. The Jeonse ratio for Seoul apartments was 72.9% in July, then steadily decreased to 69.7% in August and 67.7% in September, briefly rose to 72.2% in October, but dropped sharply by more than 10 percentage points last month.

The Jeonse transaction ratio for Seoul apartments last month was the second lowest since the city began providing related statistics in 2011. The lowest ever was 59.2% in January 2016, when the Jeonse shortage was severe. The difference between the all-time low and last month's figure is only 2.3 percentage points.

In many districts, Jeonse transactions accounted for less than half of all leases. The district with the lowest Jeonse ratio was Gangdong-gu at only 33.9%, meaning two out of three lease contracts were monthly rent. Following were Jungnang-gu (34.7%), Seocho-gu (46.2%), and Jongno-gu (49.3%), all below 50%. Next were Dongdaemun-gu (50.6%), Guro-gu (51.6%), Gangnam-gu (54.6%), and Songpa-gu (58.0%) with relatively low Jeonse ratios.

On the other hand, the proportion of Ban-jeonse, which collectively refers to 'quasi-Jeonse' where the deposit exceeds 240 months of monthly rent and 'quasi-monthly rent' where the deposit is between 12 to 240 months of monthly rent, is increasing. It expanded significantly from 31.3% in September and 26.9% in October to 37.9% in November. Since lease transaction volumes are based on tenants' fixed-date registration reports, additional reports may be possible in the future, but the overall trend is unlikely to change significantly.

A real estate agency in Songpa-gu, Seoul [Image source=Yonhap News]

The main reasons behind the disappearance of Jeonse are attributed to the new lease protection laws, including the lease renewal right and rent ceiling system, which took effect at the end of July. The supply decreased as existing Jeonse tenants stayed in their current homes for an additional two years. A representative from real estate agency A in Daechi-dong, Gangnam-gu, Seoul, said, "Usually, Jeonse listings start to appear after the college entrance exam ends, but now there is barely one listing per apartment or none at all," adding, "Jeonse prices in Seoul have all risen, so many tenants want to stay for two more years."

Strengthened real estate regulations, such as requiring two years of actual residence for reconstruction, moving into the property within six months when taking out a mortgage in regulated areas, and stricter capital gains tax exemptions for single-homeowners, have increased homeowners' self-occupancy rates, causing Jeonse shortages. According to statistics from Apartment Real Transaction Price (Asil), a real estate big data company, as of the previous day, Jeonse listings for Seoul apartments sharply decreased across all 25 districts compared to five months ago, with a decline rate of 65.1%.

As the conversion from Jeonse to monthly rent accelerates, tenants' housing cost burdens are expected to increase. Monthly rent prices are soaring due to the overall shortage of lease listings. According to KB Kookmin Bank real estate statistics, the monthly rent increase rate for Seoul apartments last month was 1.06%, more than double the previous month's increase rate of 0.40%, marking the highest monthly increase rate since statistics began in January 2016. A real estate industry official said, "As the Jeonse shortage continues, the market environment has become favorable for raising monthly rents," adding, "With more homeowners living in their own homes, monthly rents exceeding 1 million won will increase even in the outskirts of Seoul."

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