"It Was Good When Prices Rose"... The Risk of Reverse Jeonse Increases in Newly Built Apartments in Large Cities

As jeonse prices, which had surged due to the enforcement of the Lease Protection Act, have significantly dropped compared to two years ago, conflicts between landlords and tenants over the return of deposits are also emerging. With concerns about reverse jeonse spreading in the apartment market, it is analyzed that caution is required even in the metropolitan area, where housing demand is relatively high, and in newly built apartments with high residential preference.

[Image provided by Real Estate R114]

On the 2nd, according to Real Estate R114's comparison of the highest transaction prices of 32,022 jeonse contracts with the same complex and area, among 189,485 nationwide apartment jeonse transactions up to April 26 this year, which had at least one contract signed in the same period two years ago, 62% (19,928 cases) showed a decrease in the highest jeonse price compared to two years ago. By region, the proportion of price-decreasing transactions was higher in the metropolitan area at 66% (12,846 out of 19,543 cases) compared to 57% (7,082 out of 12,479 cases) in other regions.

By city and province, the order was ▲Daegu (87.0%) ▲Sejong (78.4%) ▲Daejeon (70.8%) ▲Incheon (70.5%) ▲Busan (69.6%) ▲Ulsan (68.2%) ▲Gyeonggi (66.0%) ▲Seoul (64.2%), showing an increase in jeonse price-decreasing transactions in large cities with high housing demand such as the metropolitan area. This is analyzed to be due to the relatively large drop in jeonse prices and the many cases of new contracts at lower prices.

[Image provided by Budongsan R114]

Meanwhile, concerns about reverse jeonse were found to be greater in newly built apartments. According to Real Estate R114, the change rates in jeonse prices nationwide over the past two years (from April 30, 2021, to April 21, 2023) by apartment age group were ▲within 5 years -5.85% ▲6-10 years -4.70% ▲over 10 years -0.40%, indicating that the price drop was largest in newly built apartments.

The proportion of jeonse price-decreasing transactions compared to two years ago was also highest in newly built apartments within 5 years at 70.9% (3,066 out of 4,324 cases). The proportion of price-decreasing transactions in newly built apartments in the metropolitan area was 73.8% (1,669 out of 2,260 cases), higher than 67.7% (1,397 out of 2,064 cases) in other regions. In particular, Incheon, where jeonse prices have weakened following the surge in prices in 2021 and the influx of new apartment residents, showed the highest proportion of price-decreasing transactions at 79%.

As concerns about reverse jeonse grow even in large cities with high jeonse demand and in newly built apartments with high residential preference, caution is required from the parties involved in transactions. Conflicts between landlords and tenants due to delays in returning jeonse deposits, as well as costs such as lawsuits and loan interest, can also become issues. A Real Estate R114 official said, “As the weakness in jeonse prices continues, the expiration of jeonse contracts signed at the price peak from 2021 to early 2022 is approaching one after another, so the reverse jeonse issue is expected to continue for some time.”

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