Switching to Monthly Rent or Leaving Vacant
Shortage of Jeonse Listings Intensifies
'Name Your Price' in Gangnam Area
Clear Upward Trend in Outskirts
[Asia Economy Reporters Donghyun Choi, Chunhee Lee] "Even though it's the summer off-season, prices are skyrocketing, causing chaos. I think even greater confusion will come during the autumn moving season." (Representative of real estate agency A in Songpa-gu)
"They just hastily made the law and threw it into the market, telling us to resolve disputes on our own. I really don't know who this law is supposed to protect." (Official from real estate agency B in Nowon-gu)
It has been a week since the so-called amended Housing Lease Protection Act, which includes the rent ceiling system and the right to request contract renewal, came into effect, but the confusion in Seoul's rental market shows no signs of calming down. Not only in the Gangnam area but also in the outskirts of Seoul and the Gyeonggi-do region, jeonse prices have soared to unprecedented heights, pushing the market into a state of panic. Moreover, the government has yet to propose detailed solutions for the various disputes arising between landlords and tenants, further fueling confusion and conflict.
On the 7th, Asia Economy checked the jeonse and monthly rental markets in major areas of Seoul and found that despite a week having passed since the Housing Lease Protection Act was promulgated and enforced on the 31st of last month, jeonse listings are scarce and prices are soaring. This is completely contrary to the government's assurance that the market would stabilize after the law's implementation.
Currently, in the Gangnam area, apartment jeonse prices are at the mercy of landlords' demands. Due to the law's impact, reconstruction-related relocation demand, and demand from academy districts during school vacations, demand has surged sharply while listings remain severely insufficient. A representative from real estate agency C in Daechi-dong, Gangnam-gu said, "Landlords are raising jeonse prices significantly out of concern that they might not be able to raise prices freely in the future," adding, "From the tenant's perspective, since there is no supply, many have no choice but to accept these prices." A representative from real estate agency D in Seocho-gu lamented, "Due to the two-year actual residence rule for reconstruction and the impact of the two lease laws, some landlords are moving in themselves or leaving properties vacant," and added, "It's a natural phenomenon since the law inevitably reduces jeonse supply."
The conversion of existing jeonse contracts to monthly rent is also exacerbating the shortage of jeonse listings in the Gangnam area. According to real estate information company Asil, as of this date, jeonse listings in Songpa-gu have plummeted by 23.4% compared to a month ago, totaling 3,513 listings. Seocho-gu (-8.1%), Gangnam-gu (-16.1%), and Gangdong-gu (-13.8%) also saw decreases in jeonse listings. Meanwhile, monthly rental listings in Gangdong-gu and Seocho-gu showed an increasing trend. In Gangnam and Songpa-gu, both jeonse and monthly rental listings have decreased, making the shortage of listings severe. Ham Youngjin, head of Zigbang Big Data Lab, said, "There was already demand for switching to monthly rent due to low interest rates and increased tax burdens, but the implementation of the rent ceiling system and the right to request contract renewal has fueled this trend," adding, "This trend is expected to continue for the time being."
After the real estate measures, as jeonse prices rose and jeonse listings disappeared, the real estate listings at a real estate agency in an apartment in Songpa-gu, Seoul, are completely empty.
The rise in jeonse prices was also evident in the outskirts of Seoul. On the 6th, a 58㎡ unit (exclusive area) in 'Sanggye Jugong Complex 6' in Sanggye-dong, Nowon-gu, was leased for 240 million KRW, which is 40 million KRW higher than a month ago. A representative from real estate agency E in the area said, "I thought prices had risen as much as they could by the end of last month, but they have risen further since the law came into effect," adding, "Landlords are reluctant to rent out unless the price is high, considering that they may not be able to raise jeonse prices significantly in the future." The rent ceiling system and the right to request contract renewal, introduced under the pretext of protecting tenants, are now threatening housing stability for the lower-income class. An 84㎡ unit in 'Gwangnaru Hyundai' in Gwangjang-dong, Gwangjin-gu, was traded for 700 million KRW on the 1st, which is 100 million KRW higher than the price three weeks ago. This is because the 5% rent increase cap does not apply to new lease contracts, prompting landlords to raise asking prices.
Conflicts between landlords and tenants are also becoming more diverse. There are even many tenants worried that the law's implementation might worsen their relationship with landlords, causing them harm. Shin (35), a resident of Ichon-dong, Yongsan-gu, said, "My contract ends early next year, and I want to ask the landlord various things about renewal, but I can't even get in touch," adding, "I'm worried that if conflicts arise, they might harass me by not returning the deposit on time." Professor Kwon Daejung of Myongji University's Graduate School of Real Estate emphasized, "While a lease protection law for the common people is necessary, no other country implements it nationwide only in rapidly rising areas like this," and warned, "Many unforeseen problems will be exposed in the future."
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