Rising Jeonse Prices and Loan Regulations... Increasing Hardship for Tenants

This Week, Rent Prices in the Seoul Metropolitan Area Rise Sharply
Loan Regulations Tighten... Tenants in Urgent Trouble
"Sudden Regulations... Risk of Losing Deposit"

[Image source=Yonhap News]

The government’s announcement to further tighten loan regulations has put urgent pressure on actual jeonse (long-term lease) demanders. Since the implementation of the three lease laws last year, jeonse prices have surged, and with loan limits being reduced, tenants preparing to move are increasingly dissatisfied. While the government insists that strengthening regulations is inevitable to manage household debt, voices are emerging that the desperate situations of homeless tenants must also be considered.

According to industry sources on the 9th, commercial banks have recently been reducing total loan volumes to meet the government’s target of a household debt growth rate in the 6% range. KakaoBank has suspended new loans for general jeonse deposit loans and unsecured loans until the end of the year, and banks such as Suhyup and Nonghyup have also restricted handling of jeonse loans and mortgage loans.

On the 6th, at the National Assembly’s Finance and Economy Committee audit, Financial Services Commission Chairman Ko Seung-beom responded “yes” to Democratic Party lawmaker Yoo Dong-su’s question, “To achieve the household debt growth target of 6%, do we need to tighten jeonse loans and block group loans?” adding, “It requires tremendous effort.” The industry expects that the government’s additional household debt measures to be announced this month will include regulations on loans for actual demanders such as jeonse loans.

As financial authorities clamp down on jeonse loans, dissatisfaction is growing among those seeking jeonse homes. A petitioner who posted on the Blue House’s public petition board requesting reconsideration of jeonse loan regulations said, “I received a preliminary approval from the bank for a jeonse loan and signed the contract one month before moving in, but now I am at risk of losing my deposit due to suddenly imposed regulations.”

The petitioner added, “I understand the intention to regulate to curb speculation, but with skyrocketing house prices, owning a home has become more distant, and with soaring jeonse prices, I have moved into a smaller place closer to my child’s school. With rising interest rates, I have had to cut back on my child’s academy expenses, and now, due to jeonse regulations, it looks like I will have to live in a monthly rent room.”

As more people rush to sign jeonse contracts ahead of the loan regulation tightening, jeonse prices have become even more volatile recently. According to the Korea Real Estate Board’s nationwide housing price trend report, the apartment jeonse price increase rate in the Seoul metropolitan area this week was 0.24%, up from 0.21% the previous week. In areas with steep house price increases like Incheon and Gyeonggi Province, jeonse prices rose by 0.30% and 0.28% respectively within a week, showing a significant upward trend.

With the autumn moving season underway, jeonse demand continues to rise, raising concerns that the pain for actual demanders may worsen. The jeonse supply-demand index in the metropolitan area rose to 104, higher than the previous week. The jeonse supply-demand index indicates that a value above the baseline of 100 means demand exceeds supply. For homeless people who find it even harder to buy homes due to soaring prices, restrictions on jeonse loans inevitably become a heavy burden.

Given factors such as reduced move-in volumes, the three lease laws, and the acceleration of jeonse-to-monthly rent conversions, jeonse prices are likely to continue their high-level surge for the time being, leading to widespread calls for government protection measures for actual demanders. The financial authorities are also reportedly considering countermeasures as criticisms grow that loan restrictions could cause greater harm to actual demanders. Chairman Ko said, “We will strive to balance the protection of actual demanders.”

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