Passing on the Tax Burden? Surge in High-Priced Monthly Rents Over 3 Million Won

[Asia Economy, Reporter Kim Hyemin] Concerns are being raised that the burden of the comprehensive real estate holding tax (Jongbu tax) will further destabilize the jeonse and monthly rental markets. The rental market is already experiencing a sharp increase in the proportion of monthly rent transactions due to the impact of the three major tenancy laws, and high-priced monthly rents in the several-million-won range are also rising rapidly. There are growing criticisms that the sharply increased Jongbu tax burden is being passed on to tenants, thereby increasing the financial burden on those without homes.

According to the Ministry of Land, Infrastructure and Transport’s actual transaction price disclosure system on November 23, the number of monthly rent transactions with a monthly rent exceeding 3 million won so far this year has reached 1,737, a 37.4% increase compared to the same period last year. Until 2018-2019, the number remained at about 800 cases, but it rose to 1,264 last year and has increased even more this year.

In particular, since the beginning of this year, there has been a significant rise in high-priced monthly rent transactions even in small- and medium-sized apartments with an exclusive area of more than 60㎡ and up to 85㎡. So far this year, there have been 628 reported cases of monthly rents over 3 million won for apartments in this size range. This is a clear increase compared to 178 cases in 2019 and 431 cases last year. For apartments in this size range, the number of monthly rent transactions over 1 million won has also steadily increased over the same period, from 6,756 to 7,792 and then to 7,985. Given that the total number of jeonse and monthly rental transactions for apartments in Seoul decreased from around 170,000 last year to about 150,000 this year, the increase in the proportion of high-priced monthly rent transactions becomes even more pronounced.

The prevailing analysis is that, in addition to the three major tenancy laws, the rise in holding taxes such as the Jongbu tax is a key reason for this increase in high-priced monthly rents. Landlords have shifted the burden to tenants by converting jeonse to monthly rent or adding monthly rent components, thereby increasing the volume of monthly rent transactions.

In particular, the sharp increase in the Jongbu tax burden could further exacerbate this trend. While the government maintains that the rental market is determined by supply and demand, and that there are limits to how much of the tax burden can be passed on to tenants, experts believe that jeonse listings will eventually dry up.

Yeo Kyunghee, Senior Researcher at Real Estate R114, said, "There is consensus that even landlords who previously preferred jeonse will now favor monthly rent. While it is unlikely that monthly rents will rise to unreasonable levels that defy market logic, as jeonse units are converted to semi-jeonse, the holding tax burden may be partially passed on to tenants in the form of shared costs."

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