Impact of Reverse Jeonse Crisis... 1 in 4 Cases Sees Jeonse or Monthly Rent Decrease, Record High in Reduced Renewal Cases

There is an increasing trend of lease renewal contracts being signed under cheaper monthly rent or jeonse conditions than the previous contracts. This is attributed to the rapid decline in both sale prices and jeonse prices, making it difficult to find tenants under the same conditions.

Amid the severe slump in the Jeonse market recently, there are increasing numbers of apartment complexes in Seoul where Jeonse prices have fallen below the transaction prices from two years ago. The photo shows the exterior of a real estate agency in Seoul.
[Photo by Yonhap News]

On the 25th, real estate brokerage firm Jiptos analyzed the actual transaction prices of monthly rent and jeonse nationwide from the Ministry of Land, Infrastructure and Transport for the first quarter of this year, and found that the proportion of renewal contracts with reduced prices compared to previous contracts rose to 25%. This is the highest since the Ministry of Land, Infrastructure and Transport began disclosing renewal contract data in 2021, and nearly double the 13% reduction rate in the metropolitan area during the fourth quarter of last year.

By region, Daegu Metropolitan City showed the highest rate of reduced renewal contracts at 65%. Sejong Special Self-Governing City followed with 48%, and Ulsan Metropolitan City with 35%. The region with the lowest proportion of reduced renewal contracts was Jeju Special Self-Governing Province, recorded at around 3%.

By housing type, apartments had the highest rate of reduced renewal contracts at 31%. For row houses/multi-family houses, 13% of renewal contracts were signed with reductions, officetels accounted for 10%, and detached/multi-unit houses had 6% of contracts renewed with reductions.

The sharp increase in reduced renewal contracts is attributed to the ‘reverse jeonse crisis,’ where landlords struggle to find tenants due to the rapid decline in housing prices. As landlords find it difficult to secure new tenants under the same conditions, cases of re-contracting with existing tenants at lower prices than previous contracts are increasing.

According to the Korea Real Estate Board, the nationwide jeonse supply-demand index in March was 79.3, a 27% decrease compared to 108.8 two years ago. In particular, Daegu Metropolitan City, which showed the highest rate of reduced renewal contracts, recorded 69.7, a 42% decrease from 121.0 two years ago.

Jin Tae-in, head of the apartment brokerage team at Jiptos, stated, “Due to interest rate hikes and jeonse fraud, demand for jeonse transactions is decreasing.” He added, “Jeonse prices are falling due to an increase in move-in volumes nationwide, including in Gangnam.” He also noted, “Although jeonse loan interest rates have slightly decreased recently, they remain more than twice as high as the 2% level two years ago, making jeonse interest burdensome. Therefore, the proportion of reduced monthly rent and jeonse renewal contracts is expected to remain high for the time being.”

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