Apologies Offered but No Solutions... How Long Will the Historic Jeonse Crisis Last?

'Jeonse Crisis' May Continue Until Early Next Year
Kim Hyun-mi "I Feel Sorry" Apologizes
No Mention of Measures... Statistical Indicators Worsening

Minister of Land, Infrastructure and Transport Kim Hyun-mi is listening attentively to the committee members' questions and reviewing documents during the National Assembly Land, Infrastructure and Transport Committee's audit of the Ministry of Land, Infrastructure and Transport, the Administrative City Construction Agency, and the Saemangeum Development Agency held at the Government Complex Sejong in Sejong City on the 16th. (Photo by Yonhap News)

[Asia Economy Reporter Moon Jiwon] Although the Minister of Strategy and Finance and the Minister of Land, Infrastructure and Transport, who oversee real estate-related policies, recently bowed their heads regarding the 'Jeonse crisis,' they failed to present any suitable solutions. As the shortage of Jeonse properties worsens and the living conditions of ordinary citizens deteriorate significantly, concerns are rising that tenants' suffering will continue to grow for the time being, given that even the government cannot come up with effective measures.

On the 18th, a review of the real estate industry and major domestic real estate-related online communities shows that cases of tenant damages and disputes between landlords and tenants due to the recent Jeonse crisis are rapidly increasing. Since the implementation of the Jeonse and monthly rent cap system and the contract renewal request system at the end of July, the Jeonse market has seen a disappearance of available properties and a sharp rise in prices, intensifying the 'Jeonse crisis.'

Kim Hyunmi Apologizes After Hearing Na Hoon-a's Song 'Tess-hyung'

As the situation worsened, heads of related ministries, who had maintained the stance that "things will get better soon," also bowed their heads. Minister of Land, Infrastructure and Transport Kim Hyunmi apologized on the 16th during the Ministry of Land, Infrastructure and Transport's parliamentary audit when People Power Party lawmaker Song Seokjun played part of singer Na Hoon-a's song 'Tess-hyung' and pointed out that "housing policies have made people's lives difficult," saying, "I feel sorry for the public's great concern."

Deputy Prime Minister and Minister of Strategy and Finance Hong Namgi said at the 8th Real Estate Market Inspection Meeting on the 14th, "We take the difficulties faced by those looking for new Jeonse homes seriously." He added, "We will closely examine and discuss the factors driving Jeonse price increases with related ministries." This implies that additional measures will be considered since there is no sign of the market improving soon.

However, analyses suggest that there are no suitable countermeasures even within the government, let alone the market. While rent subsidy measures that immediately help tenants could be introduced, they are likely to further drive up landlords' asking Jeonse prices. It is also difficult to introduce supply measures to increase Jeonse properties or additional policies such as strengthening the Jeonse and monthly rent cap system.

For this reason, there are forecasts that the current Jeonse instability in the market could continue until early next year. Minister Kim said during the audit, "I think it will take some time until the market stabilizes." Regarding the possibility of announcing additional measures, she only replied, "We will observe the market situation a bit more first." A Ministry of Land, Infrastructure and Transport official also told this publication, "We are not currently discussing additional measures related to Jeonse or monthly rent."

Even Houses with Large Loans Are Quickly Contracted... A Risky Jeonse Market

Meanwhile, market instability is increasing further. A representative issue is disputes arising during sales due to tenants exercising their contract renewal rights. If tenants exercise their rights six months before the contract ends, the landlord finds it difficult to sell the house because the new buyer cannot occupy it.

Deputy Prime Minister Hong Namgi is also experiencing difficulties disposing of a house in Uiwang, Gyeonggi Province, after a tenant exercised the contract renewal right following the sale contract. It is known that a significant portion of complaints received by the government involve similar issues. In response, the government plans to enact the so-called 'Hong Namgi Prevention Act,' which will clearly confirm whether tenants exercise their rights at the contract stage to prevent later reversals, but experts analyze that it will be difficult to completely prevent side effects.

Concerns about 'empty shell houses' are also growing amid continuous Jeonse price increases. According to the industry, Jeonse houses with large mortgage loans, which were previously avoided, are now being quickly contracted due to the Jeonse shortage. These houses may pose risks if housing prices enter a correction phase, making it difficult for tenants to recover their Jeonse deposits, but tenants urgently needing Jeonse homes have limited options.

According to the weekly housing market trend data from KB Real Estate Live On, as of the 12th, the Jeonse supply-demand index for Seoul apartments remains at an 'all-time high' level of 191.9. This index ranges from 0 to 200, with values above 100 indicating demand exceeds supply. The indices for Gyeonggi Province and the metropolitan area are even worse at 196 and 194.4, respectively. KB Real Estate Live On explained, "In some Seoul complexes, properties are immediately sold even when prices are raised."