Seoul apartment jeonse deposits up 100 million won in two years

Analysis of Ministry of Land, Infrastructure and Transport actual transaction price data

New jeonse deposits jump average 100 million won over two years

Further rises expected if landlord tax benefits cut in July

A real estate agency in central Seoul displays property listing prices. [Herald DB]

New apartment jeonse deposits signed in Seoul this year have risen by roughly 100 million won (about $64,700) compared with two years ago, driven by a sharp drop in available listings. Experts warn that if a tax reform package due in July reduces benefits for registered landlords and tighter regulations are imposed on jeonse loans, the resulting price surge could push many tenants into housing instability.

Godeok Gracium jeonse up from 850 million to 1.1 billion won in two years

The price increase appears to reflect a shrinking supply of listings. <style ref="s3">The number of new jeonse contracts signed so far this year totaled 23,182 — a 34 percent drop from 35,492 in the same period last year</style> and a 26 percent decline from 31,533 two years ago.

The shortage and price surge feel even more acute on the ground. The 84-square-meter unit type at Godeok Gracium in Godeok-dong, Gangdong-gu, was trading at around 850 million won as recently as May 2024, but a new contract was signed at 1.1 billion won in January — a jump of 250 million won in two years.

The same unit type at Jamsil Els in Jamsil-dong, Songpa-gu, went for 1.25 billion won on a new contract in May 2024, but by May this year contracts were being signed at 1.4 billion won, a 150 million won increase over two years. At the Lotte Woosung 115-square-meter apartment in Junggye-dong, Nowon-gu, jeonse contracts available at 800 million won through May 2024 have been trading at 950 million won since January.

Lee: 'Homes that were rented out were sold — demand fell too'

A major factor behind the rising jeonse prices is the government's Oct. 15 measure designating all of Seoul as a land transaction permit zone, which imposed an owner-occupancy requirement on buyers. By effectively banning the purchase of homes with existing tenants in place, the policy prompted buyers to move in themselves, causing the supply of jeonse listings to fall sharply.

The government opened a window allowing multi-homeowners and non-resident single-homeowners to sell tenanted properties through year-end, but because buyers must occupy the units themselves once lease contracts expire, rental demand is set to grow further.

President Lee Jae-myung, at a press conference marking his first year in office Monday, acknowledged that jeonse supply had declined. "These were homes that were being rented out, and they were sold, so it is natural that the jeonse supply would shrink," he said. "But the people who bought them are moving in to live there themselves, so demand has fallen by the same amount."

He also said that while jeonse prices had risen noticeably, the increase was not as dramatic as it might feel. "Looking at the statistics on jeonse price increases, it is true that they have risen considerably in a way people can feel," he said. "But statistically, it has not been a massive surge. It is a normalization process."

Data from the Korea Real Estate Board show that Seoul's cumulative jeonse price increase from Jan. 1 through June 1 stood at 3.77 percent — not a large figure in isolation. The concern is the pace: that 3.77 percent rise is roughly six times the 0.65 percent recorded over the same period last year.

President Lee Jae-myung speaks at a briefing on preparations for the 48th UNESCO World Heritage Committee session. [Yonhap]

Tax benefit cuts for landlords seen pushing rents higher

On the ground, market participants see the housing crunch deepening far faster than the government acknowledges, and the direction of upcoming housing policy points toward further declines in jeonse supply.

The market widely expects the government's tax reform package, due in July, to impose heavier taxes on registered rental properties whose mandatory lease periods have expired — treating them the same as ordinary multi-homeowners. That could prompt existing landlords to evict tenants and put properties up for sale, or alternatively pass their higher tax burden on to tenants through rent increases.

If financial regulations are added on top — including an outright ban on extending jeonse loans for single-homeowners and the inclusion of jeonse loans in the debt service ratio calculation — the jeonse market could face even greater turmoil.

"There is a need to expand supply across both apartment and non-apartment housing to ease upward pressure on jeonse prices," said Yoon Su-min, a real estate specialist at NH NongHyup Bank's All100 Advisory Center. "For now, the supply effect that the market can actually feel is limited, so rental market instability is likely to persist for some time."

Kim In-man, director of Kim In-man Real Estate Economic Research Institute, said the current jeonse crunch differs fundamentally from the price spike seen under the Moon Jae-in administration, which was driven by the passage of the "2+2" lease law. "What we have now is a supply vacuum — there simply are no listings," he said. "The housing stability of ordinary people is being shaken, and treating that as a 'normalization' process could be a serious mistake."

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