Apartment complexes in Banpo are visible from Ichon-dong in Yongsan-gu, Seoul. [Herald DB]
Apartment complexes in Banpo are visible from Ichon-dong in Yongsan-gu, Seoul. [Herald DB]

A salaried worker in Junggye-dong, Nowon-gu, Seoul — identified only by the surname A — recently decided to move into a nearby villa as his jeonse lease approached expiration. The jeonse deposit on his apartment had risen by nearly 100 million won ($64,300) compared with two years ago, making renewal unaffordable. "The banks have raised the bar on jeonse loans so high that renewing the apartment contract was simply out of the question," he said. "I had been avoiding villas because of jeonse fraud fears, but with my back against the wall I had no other choice."

Tenants priced out of the apartment jeonse and monthly-rent market are being pushed en masse into non-apartment housing — villas, multi-family units and the like — in what analysts are calling an involuntary "exodus from apartments." With jeonse supply severely constrained and deposits surging, compounded by sweeping government restrictions on jeonse loans, lower-income households have begun a residential downgrade.

Housing statistics released Saturday by the Ministry of Land, Infrastructure and Transport show that nationwide jeonse and monthly-rent transactions from January through May totaled 1,230,614 — up 2.6 percent from the same period last year.

Broken down by housing type, however, the divergence is stark. Apartment jeonse and monthly-rent transactions nationwide came to 528,858 over the period, a 7.2 percent drop from a year earlier, while transactions for non-apartment housing — villas, multi-family units and detached homes — reached 701,756, jumping 11.5 percent year on year.

Tenants are returning to the non-apartment market even though it was once gripped by what observers called "villa phobia" in the wake of widespread jeonse fraud.

The shift is visible across regions. Apartment jeonse and monthly-rent deals in Seoul fell 6.5 percent from a year ago, while non-apartment transactions rose 6.3 percent. The gap is even wider outside the capital: apartment transactions in the provinces dropped 7.4 percent while non-apartment deals surged 19.1 percent, deepening the divide between housing types.

Experts point to a "supply lockup" as the primary driver of the decline in apartment transactions. A sharp drop in new apartment move-ins, combined with overlapping regulatory measures, has effectively removed available units from the market.

New Seoul apartment move-ins have been cut roughly in half, from about 32,000 units last year to around 19,000 this year. The government's Oct. 15 policy package last year also extended the owner-occupancy requirement to land-transaction permit zones across all of Seoul, in effect blocking new rental supply from reaching the market.

According to Asil, a real estate big data platform, available jeonse and monthly-rent listings for Seoul apartments stood at 37,551 as of Saturday — down 14.5 percent from 43,917 two years ago.

The financial strain on tenants shows up in the numbers. The average jeonse deposit for a Seoul apartment from January through May this year was 658.75 million won, a 19.1 percent jump — roughly 100 million won — from 553.77 million won two years ago.

Tenants renewing or signing new leases after two years must now come up with an additional 100 million won. That pressure is also accelerating a shift toward monthly rent arrangements, as landlords convert deposit increases into monthly payments.

The monthly rent share of Seoul apartment leases hit 51.3 percent for the first time, crossing the 50 percent threshold. Park Won-gap, a senior real estate specialist at KB Kookmin Bank, said rising jeonse prices, tighter bank lending standards and the extension of the debt service ratio regulation to single-homeowners have made it harder for tenants to borrow. "Ultimately, a spatial transition is now fully under way — a residential downsizing across three dimensions: location, unit size and housing type," he said.

The second half of the year looks more difficult. The government has signaled additional measures to rein in household debt, including cuts to jeonse loan guarantees and a broader expansion of the debt service ratio requirement, pointing to a deepening housing crunch for lower-income households.


attom@heraldcorp.com