Sharp Rise in Officially Announced Prices Spurs 'Jeonse to Monthly Rent' Shift... Ultimately, Tenants Suffer

"Rising Property Taxes Passed on to Tenants"... Concerns Over a Vicious Cycle

[Image source=Yonhap News]

[Asia Economy Reporter Kangwook Cho] "I was pushed out from Seoul to Gyeonggi-do because I couldn't afford the jeonse prices, and now it looks like I'll have to live on monthly rent."

This post appeared on a real estate community after the announcement of a sharp rise in official apartment prices this year, which signals an increase in housing holding taxes. It suggests that homeowners facing higher tax burdens might pass these costs onto tenants by raising rents instead of putting their properties on the market. There is growing concern that tax pass-through will further accelerate the ‘conversion of jeonse to monthly rent’ triggered by the new lease law.

According to industry sources on the 16th, right after the Ministry of Land, Infrastructure and Transport announced this year’s official price increase rate yesterday, major real estate communities were flooded with inquiries from landlords, discussions on response strategies, and worries from tenants.

Among multi-homeowners, some believe they can endure the higher holding taxes by passing the costs onto tenants. On a real estate forum on a portal site, a post titled “The official price surge is passed on to tenants” stated, "Taxes are passed on to jeonse and monthly rents, which in turn causes housing prices to rise further," and added, "There is no need to worry about taxes." Another person said, "I worked hard all my life to buy my home; how could I sell it? Naturally, it’s common sense to find money elsewhere."

Tenants’ anxiety is also growing. One tenant expressed concern, saying, "Would a homeowner sell their house just because they have to pay several hundred million won in capital gains tax or a few tens of millions in holding tax? They will try to endure by passing the burden onto tenants and raising house prices as much as possible." Another tenant lamented, "If holding tax and comprehensive real estate tax increase, the rise will be passed on to monthly and semi-monthly rents, and eventually jeonse prices will follow. When jeonse prices rise, housing prices rise, and then taxes increase again due to regulations, creating a vicious cycle."

The upcoming by-elections next month and the presidential election next year are also cited as reasons why some multi-homeowners might endure the higher holding taxes by passing them onto tenants. This is because it is uncertain how the government’s real estate policies will change depending on the results. In particular, there is criticism that the holding tax increase has already been reflected in the market and those who wanted to sell have already sold.

Professor Daejung Kwon of Myongji University’s Department of Real Estate said, "While retirees and elderly people with unstable incomes may dispose of their properties, there is also concern that landlords will pass the holding tax burden onto tenants, causing jeonse and monthly rents to rise further."

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