Positive Tenant Protection and Information Transparency... Concerns Over Jeonse and Wolse Market Contraction Due to New Regulations

Automatic Confirmation Date Assignment Strengthens Tenant Protection and Enables Management Response
Expert: "Government Oversight Extends to Pre-Contracts, So Only Highlighting Benefits Is Difficult"
Concerns Remain Over Using Landlords' Full Rental Income Disclosure as Taxation Basis

[Asia Economy Reporter Kangwook Cho] As the government has confirmed the full implementation of the housing jeonse and monthly rent reporting system starting in June as originally planned, attention is focusing on the impact it will have on the rental market. While there is hope that the rental market will become more transparent and tenant protection functions will be strengthened, there are also concerns that initial confusion and side effects are inevitable. In particular, although the government has drawn a line by saying "no" for now, concerns remain that the real estate transaction information built through the jeonse and monthly rent reporting system could be used as a basis for taxation. This is because landlords' rental income will be fully exposed, revealing the tax base.

◇ Tenant protection and improved information transparency are positive = The Ministry of Land, Infrastructure and Transport states that tenant protection will be greatly strengthened as the confirmed date is automatically granted through rental reporting. This is because contracts that tended not to receive a confirmed date, such as small-amount, short-term contracts, and renewal contracts, will now be granted a confirmed date through the reporting system. Another advantage is that rental market information such as rental prices, duration, and renewal rates will be transparently disclosed. Tenants can check the surrounding new and renewal rental price information before signing rental contracts.

Experts generally agree with these positive effects. Hapsu Park, Senior Real Estate Specialist at KB Kookmin Bank, evaluated, "With the introduction of the reporting system, behaviors such as asking tenants to write double contracts, signing expensive contracts but reporting lower prices to make tenants uneasy will disappear," adding, "Statistical approaches, operation, and management responses to the rental market will also become possible."

◇ Concerns about contraction in jeonse and monthly rent supply = However, initial market confusion is expected to be unavoidable. Despite the system’s positive functions, the market perceives it as a ‘new regulation.’ There are concerns that a reaction causing a contraction in jeonse and monthly rent supply or intentional reporting errors may occur. In areas where there is a shortage of listings and rental prices may rise, it is also pointed out that landlords might partially pass on the tax burden to tenants.

Professor Daejung Kwon of Myongji University’s Department of Real Estate said, "While there is a positive function in strengthening market transparency and correcting transaction order, from the market’s perspective, regulations are increasing," and pointed out, "Considering that even private contracts are all being scrutinized by the government, it is not possible to mention only advantages."

◇ Although the government denies it... concerns about use as a taxation basis remain = With the full implementation of rental reporting, landlords’ rental income will be fully revealed. Considering the tax deduction rate, if monthly rent exceeds 330,000 KRW, rental income tax must be paid. Since the rental reporting system applies to ‘monthly rent exceeding 300,000 KRW,’ it is roughly aligned with the rental income tax imposition criteria. Therefore, despite the Ministry of Land, Infrastructure and Transport’s denial that there are no plans to use rental reporting information as tax data, concerns remain that jeonse and monthly rent reporting information will be used as a basis for taxation.

Additionally, there is a possibility of linkage with last year’s discussion on ‘standard rent.’ Former Minister of Land, Infrastructure and Transport Hyunmi Kim mentioned in the National Assembly last September, "To introduce standard rent, it is fundamentally necessary to secure data on the overall rental market," adding, "It is an issue that can be considered after the introduction of the rental registration reporting system."

Professor Kyoeon Shim of Konkuk University’s Department of Real Estate expressed concern, saying, "What the market is actually worried about is that the government could combine transaction information from the jeonse and monthly rent reporting system with National Tax Service data and use the secured data to push for the introduction of ‘standard rent,’ which caps rent at a certain level," adding, "In that case, the jeonse and monthly rent market will shrink rapidly, supply will sharply decrease, and a phenomenon of listings being withheld will occur."

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