Increased Monthly Rent Refugees Due to Insufficient Jeonse Prices

4 out of 10 Jeonwolse Transactions

[Image source=Yonhap News]

This month, the number of monthly rental contracts for apartments in Seoul has increased compared to last month. However, despite demand exceeding supply, jeonse (long-term lease) contracts are shrinking, indicating an acceleration in the shift from jeonse to monthly rent.

According to the Seoul Real Estate Information Plaza on the 27th, the total number of jeonse and monthly rental transactions for apartments in Seoul currently stands at 9,265, which is over 1,000 fewer than last month's 10,997. Meanwhile, monthly rental transactions have increased to 3,892 so far this month, compared to 3,706 last month. The share of monthly rentals surged from 33.7% in November to 42% in December. This means that more than 4 out of 10 lease contracts this month are monthly rent agreements.

Additionally, it appears that in the recent Seoul apartment market, the supply of apartments seeking tenants is increasing more than the demand for jeonse leases. According to the Korea Real Estate Board, as of the 20th, Seoul's apartment jeonse supply-demand index was 96.9, remaining below 100 for three consecutive weeks. Contrary to the government's assessment that "the jeonse market is stabilizing," the market is experiencing short-term sharp rises in jeonse prices, causing burdens, while loan regulations and interest rate hikes have reduced demand.

The volume of monthly rental transactions for Seoul apartments has already surpassed last year's total of 60,579 transactions, reaching an all-time high. This is the highest figure since related statistics began being compiled in 2011. Due to the enforcement of the Housing Lease Protection Act, jeonse prices have risen significantly, but tenants who cannot secure deposits because of tightened loan regulations are being pushed into semi-jeonse or monthly rent agreements.

This is especially a heavy burden for actual users who need to find jeonse housing next year. Moreover, tenants who have already used their two-year contract renewal rights and are being pushed back into the jeonse market are inevitably more anxious. While contract renewals were possible within a 5% limit under the rent ceiling system for jeonse and monthly rent, new contracts see jeonse prices soaring significantly, raising concerns that more 'monthly rent refugees' may emerge.

Yoon Ji-hae, chief researcher at Real Estate R114, said, "If the jeonse and monthly rental market is unstable, it stimulates demand for home purchases, which ultimately acts as a major factor driving up housing prices," adding, "It is not simply that there is no jeonse demand, but rather that turnover is not happening."

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