Troubling Jeonse Market... Intensifying Conflicts Between Landlords and Tenants

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Decline in Jeonse Prices, Preference for Monthly Rent

Increase in Disputes Over Housing Deposit Returns

[Asia Economy Reporter Kim Min-young] Bae (39, female), whose Jeonse contract expires on December 8 this year, planned to move to a larger house because her child will enter elementary school next year. Since she exercised her right to renew the contract two years ago, she thought she had to vacate the house this year and diligently looked for nearby listings. However, on the 29th, the real estate agent who was supposed to show her the house suddenly canceled the appointment. The landlord requested more time, saying, "I need to find a tenant before I can return the deposit."

Amid growing concerns about reverse Jeonse difficulties due to falling Jeonse prices, conflicts over housing deposit returns between landlords (lessors) and tenants (lessees) continue unabated. Although landlords need to find new tenants to return the deposits, these disputes are expected to increase as it becomes difficult to find tenants due to market stagnation or because the previous deposit cannot cover the reduced Jeonse price.

As of September, the number of housing deposit return disputes reported to the Korea Legal Aid Corporation reached 450 cases. This accounts for 33% of the total 1,356 lease-related disputes reported to the corporation this year. Disputes related to housing deposit returns have been chronic points of conflict between landlords and tenants, recording 905 cases in 2020 and 683 cases in 2021. The number of cases involving deposit or housing returns reported through the Korea Real Estate Board also surged from 3 cases in 2020 to 70 in 2021, reaching 88 cases by September this year, already surpassing last year's total.

Cases requesting legal consultations due to concerns over deposit returns have also increased. Attorney Kim Ye-rin of Deoksu Law Firm stated, "With the decline in Jeonse prices, concerns about returning Jeonse deposits have grown, leading to a 4 to 5 times increase in related litigation consultations recently. Also, coupled with the surge in Jeonse fraud, many residents of Incheon and Bucheon, where Jeonse fraud was rampant, are affected."

The market atmosphere has reversed in just two years due to the decline in Jeonse prices. According to the Korea Real Estate Board, as of August, the average Jeonse price for apartments nationwide was 314.74 million KRW. The nationwide Jeonse price index change rate over the past six months has been expanding from -0.03% → -0.05% → -0.08% → -0.16% → -0.45% → -0.5%.

The market expects disputes over deposit returns to increase further. Although contracts for households that exercised their right to renew two years ago are expiring, the burden of loan interest due to rising interest rates is increasing, leading to a growing preference for monthly rent over Jeonse, making it difficult to find tenants. Looking at the Jeonse supply-demand index from the Real Estate Board, the Seoul apartment Jeonse supply-demand index has been declining: 94.2 in June, 91.3 in July, and 87.7 in August. A value below the baseline of 100 means there are more landlords seeking tenants than tenants looking for houses.

Especially in a situation where Jeonse supply exceeds demand, cases of Jeonse contracts being signed at lower prices than two years ago are increasing, raising concerns about reverse Jeonse difficulties. According to Real Estate R114’s comparison of Jeonse prices (market prices) for 2,784,030 apartments in the metropolitan area as of this month with those two years ago, the proportion of units with decreased prices was 2.8% (78,412 units) of the total.

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