One Year of Jeonse Measures... Prices Uncontrolled and Monthly Rent Increased

Listings pile up and transaction volume plummets, but the upward trend continues
Tenants cry out "No homes to live in"... Ultimately turning to monthly rent
No measures for tenants or for multi-homeowners to dispose of properties

[Asia Economy Reporter Kangwook Cho] "It's a two-year-old new apartment on a high floor with a great view, but no one comes to see it. As a tenant, I can't lower the jeonse price, and I don't know what to do." "I have to move out next week, but no one has come to see the house this month, so I'm very anxious."

One year after the government announced the November 19th jeonse and monthly rent measures last year, the Seoul jeonse market appears calm on the surface. Listings are piling up, but transactions have sharply declined, easing the jeonse crisis somewhat. However, despite the increase in listings, apartment jeonse prices continue to rise. In fact, the market trend shows that more tenants who cannot afford the skyrocketing jeonse prices are being pushed into monthly rent.

◇ Unable to control prices and acceleration of monthly rent = Recently, the Seoul apartment jeonse market is experiencing an unusual phenomenon where listings accumulate but tenants complain that "there is no house to live in." According to real estate information company Asil, as of the 19th, the number of Seoul apartment jeonse listings was 30,501, more than double compared to the same period last year (12,925 listings). This is the highest number of listings accumulated in one year and three months since August 15 last year (30,833 listings). Although listings have increased, transactions have sharply decreased. According to the Seoul Real Estate Information Plaza, last month’s Seoul apartment jeonse transactions were 7,745 (based on reports as of the 19th), down about 29% from 10,890 in October last year. In particular, September’s transaction volume dropped nearly 3,000 from 9,769 in the previous month to 6,924. The Seoul apartment jeonse transactions fell below 7,000 for the first time in six years since September 2015 (6,420 transactions). Judging by transaction volume alone, the market seems to have cooled down.

However, analyzing the transactions reveals a worsening trend in tenants’ housing quality. The most serious issue is the ‘monthly rent-ification’ of jeonse. According to the Ministry of Land, Infrastructure and Transport, the proportion of monthly rent in Seoul apartment lease transactions reached 39.9% from January to September this year, up 9.8 percentage points from 30.1% in the same period last year. Landlords facing increased burdens such as comprehensive real estate tax have shifted from jeonse to semi-jeonse or monthly rent, causing monthly rent transactions to rise from 48,260 last year to over 54,000 this year, an increase of more than 6,000.

Experts analyze that a combination of government loan regulations, transaction cliffs, price increases due to jeonse price matching, the three lease laws, and the monthly rent-ification of jeonse have all contributed to this situation.

Kwon Dae-jung, professor of real estate at Myongji University, pointed out, "The government has not presented jeonse measures or price stabilization policies for tenants," adding, "There were no measures to activate the construction of multi-family or detached houses in low-density areas or to enable multi-homeowners to sell their houses."

◇ Although 80% of the target was achieved... mismatch excluding apartments = Last month, the government announced that it had achieved 81.2% of this year’s jeonse and monthly rent supply target of 61,000 households set in the November 19th measures. The supply through utilizing public rental vacancies was 46,000 households, exceeding the target of 39,100 households, which the government self-assessed as a successful performance.

However, the market consensus is that the supply effect from the government’s November 19th jeonse measures was insufficient to resolve the jeonse shortage. Contrary to the demands of jeonse real demanders who want apartments, the government’s jeonse measures focused on supplying one-room or villa units for one- or two-person households, causing a ‘mismatch’ from the start.

Seo Jin-hyung, president of the Korea Real Estate Society and professor at Gyeongin Women’s University, evaluated, "The government’s jeonse measures prevented multi-homeowners’ inventory houses from entering the rental market," adding, "Especially, by focusing only on quantity, the supply had to increase in locations with poor conditions, inevitably causing a mismatch between supply and demand."

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