Back to Jeonse... Seoul Apartment Jeonse Ratio Hits 'Highest' in 16 Months

March Jeonse Transactions Exceed 61% of Monthly Lease Volume
Concerns Over Reverse Jeonse Persist... Increase in Deposit Non-Return Incidents

The proportion of jeonse (long-term lease) apartments in Seoul, which had sharply declined due to concerns over jeonse fraud and reverse jeonse, has increased again, reaching the highest level in 1 year and 4 months. This is attributed to the drop in jeonse prices compared to the second half of last year and the reduced interest burden on jeonse loan financing, which has led to increased demand for jeonse.

[Image source=Yonhap News]

According to the Seoul Real Estate Information Plaza on the 7th, out of 22,639 apartment rental transactions in Seoul in March this year, 13,934 were jeonse, accounting for 61.5%. This is the highest figure since November 2021, when jeonse accounted for 61.6% (11,554 out of 18,744 transactions). As of this day, the reported jeonse proportion for April in Seoul is 62.3% (9,703 out of 15,567 transactions), higher than in March. Considering that the reporting deadline for transactions is within 30 days of the contract date, the transaction volume for April is expected to increase further.

The reason for the shift in demand from monthly rent back to jeonse is analyzed to be due to the recent significant decline in jeonse prices and the reduced interest burden resulting from the slowdown in interest rate hikes, which has increased jeonse demand.

Previously, the jeonse proportion of Seoul apartments, which had maintained between 50-60%, fell to 47.3% in December last year due to steep interest rate hikes and the impact of jeonse fraud. During the same period, the monthly rent proportion increased from the 30-40% range to 52.7%.

The jeonse proportion of Seoul apartments recorded 55.2% in January this year and exceeded 60% after March. Although the transaction volume is still low at the beginning of the month, out of 1,134 lease contracts this month, 753 (66.4%) were jeonse. This is the highest proportion since May 2022, two years ago, when it was 67.1% (11,778 out of 17,560 transactions).

Not only apartments but also villas (multi-family and row houses) have seen an increasing trend in jeonse proportions this year. Villas had seen a decline in jeonse demand due to recent concerns over "empty jeonse" and jeonse fraud. In fact, the jeonse proportion dropped from about 70% in early 2021 to 49.7% in December last year. However, the jeonse proportion for villas in Seoul has steadily increased to 50.3% in January, 52.9% in February, and 56.8% in March this year.

While jeonse demand is recovering like this, warnings about reverse jeonse difficulties are growing louder. According to Real Estate R114, 62% (10,928 cases) of nationwide apartment jeonse transactions this year were price-decreasing transactions compared to two years ago. This means that in 6 out of 10 cases, landlords have to return money to tenants when signing new contracts, which is the reverse jeonse phenomenon.

As such reverse jeonse cases are occurring frequently, concerns about non-return of jeonse deposits are also increasing. According to the Housing and Urban Guarantee Corporation (HUG) and others, 1,385 jeonse deposit accidents occurred nationwide in March. The amount involved in jeonse deposit accidents was 319.9 billion KRW, an increase of 65.7 billion KRW (25.8%) from the previous month (254.2 billion KRW). The amount of accidents in March alone is comparable to the total jeonse deposit accident amount for the entire year of 2019 (344.2 billion KRW).

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