"As Jeonse Prices Rise, Jeonse Deposit Insurance Approaches 13 Trillion Won"

Boheomyeon Research Institute 'Current Status and Implications of Jeonse Deposit Insurance'

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[Asia Economy Reporter Oh Hyung-gil] Due to the overheating of the real estate market, the amount of subscription and payment scale of jeonse deposit insurance has recently been rapidly increasing.

It has been pointed out that measures are needed to effectively reduce information asymmetry by enabling tenants to identify whether the landlord has any guarantee incidents in advance to prevent accidents where the jeonse deposit is not returned.

On the 16th, Park Hee-woo, a research fellow at the Korea Insurance Research Institute, stated in the report "Current Status and Implications of Jeonse Deposit Insurance," "The subscription amount (guarantee performance) of the Korea Housing & Urban Guarantee Corporation's jeonse deposit return guarantee reached 13.6 trillion won in the second quarter of this year, an increase of 58.6% compared to the same period last year."

Jeonse deposit insurance is a product where, if the landlord fails to return the jeonse deposit to the tenant after the end of the jeonse contract, the guarantor pays on behalf of the landlord, and the guarantor recovers the paid deposit from the landlord through subrogation.

There are the Korea Housing & Urban Guarantee Corporation (HUG) jeonse deposit return guarantee, Seoul Guarantee Insurance (SGI) jeonse deposit credit insurance, and the Korea Housing Finance Corporation (HF) jeonse protection guarantee. Seoul Guarantee's jeonse deposit credit insurance was launched in 1995, HUG's jeonse deposit return guarantee in September 2013, and HF's jeonse protection guarantee in July 2020.

Researcher Park said, "The proportion of officetels in the guarantee performance of jeonse deposit return guarantees has continuously increased from 0.5% and 0.4% in 2016 to 13.5% and 10.8% in the first half of 2021, based on the number of cases and amount, respectively," adding, "The increasing share of officetels in jeonse deposit return guarantees is due to officetels showing a high jeonse rate and increased anxiety about guarantee incidents."

He continued, "Since subscription is not possible when the jeonse deposit is higher than the sale price, there is a possibility of a protection gap for tenants due to subscription rejection in the case of officetels," emphasizing, "Officetels have high jeonse rates, and in some areas, 'empty jeonse' officetels where the jeonse price exceeds the sale price are being produced. Therefore, if subscription rejections for jeonse deposit insurance increase, protection gaps may occur, increasing tenant anxiety and damage."

Currently, the Ministry of Land, Infrastructure and Transport is reviewing institutional improvement measures to enable tenants to identify incidents of non-return of deposits related to other houses owned by the landlord at the time of lease contracts.

Researcher Park added, "Although jeonse deposit insurance has become a familiar product to consumers, there are still consumers who are unaware of the product or have difficulty accessing it, so it is necessary to prepare measures to improve consumer convenience."

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