Tenants Forced to Pay Monthly Rent... The "Jeonse Cold Wave" Will Be Colder Next Year

Seoul Apartment Lease Contracts Hit Lowest in Over 4 Years
4 out of 10 Leases Include Monthly Rent
Next Year Lease Renewal Rights Expire... Monthly Rent Shift Accelerates

[Image source=Yonhap News]

[Asia Economy Reporter Kangwook Cho] "Will I be able to find a jeonse (long-term lease) next year? I'm worried whether I should leave Seoul now and buy a house somehow, as next year might be a time when even finding jeonse becomes difficult."

Concerns are growing that an even harsher winter will hit the jeonse market next year amid the government's strong 'tightening of money supply.' Jeonse prices in major Seoul complexes have already soared, causing jeonse transactions to plummet and forcing many tenants into monthly rent. Especially in August next year, when the right to request contract renewal expires, the 'monthly rent-ification of jeonse' is expected to accelerate, potentially ushering in a full-fledged monthly rent era.

According to the Seoul Real Estate Information Plaza on the 15th, as of last September, there were 11,105 apartment lease contracts in Seoul, down by 5,423 from August (16,528 contracts). This is the lowest in over four years since October 2017 (11,022 contracts). Among these, contracts excluding pure jeonse?such as monthly rent, semi-monthly rent, and semi-jeonse?accounted for 4,289 cases (38.6%). This is more than 3 percentage points higher than January this year (35.5%) and over 11 percentage points higher compared to July last year (27.4%), before the lease protection law was implemented.

The bigger problem starts in August next year. Tenants who exercised their right to request contract renewal under the lease protection law since July last year will have to sign new contracts without the benefit of a rent increase cap of 5% or less. Landlords are likely to raise deposits significantly to match the already sharply increased surrounding jeonse market prices or even try to offset the burden of increased holding taxes such as property tax and comprehensive real estate tax through monthly rent. Tenants who cannot afford the suddenly increased jeonse deposit will have no choice but to reluctantly seek semi-jeonse or monthly rent, accelerating the shift from jeonse to monthly rent.

Another concern is the decrease in housing supply next year. According to real estate big data company Asil, the number of apartment move-ins in Seoul next year is expected to be 18,250 units, a 40% decrease from 30,595 units this year. Additionally, the strengthening of actual residence requirements will further reduce the amount of new jeonse supply.

Kim Seonghwan, a senior researcher at the Construction Industry Research Institute, pointed out, "Currently, there is a large gap between existing contracts and new contracts, so it does not appear in the index, but the increase in jeonse prices is significant," adding, "After August next year, the volume of contracts with the right to request renewal will come to the market, which could lead to a rise in jeonse prices."

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