[Reporter’s Notebook] "Jeonse Crisis Is Due to Low Interest Rates"... Government Quick to Shift Blame

[Asia Economy Reporter Moon Jiwon]

"I feel sorry." (Kim Hyunmi, Minister of Land, Infrastructure and Transport)

"I reflect on the real estate policy." (Lee Nak-yeon, Leader of the Democratic Party of Korea)

As the ruling party leader and the head of the government's real estate policy recently bowed their heads in response to the recent Jeonse crisis, the Ministry of Land, Infrastructure and Transport (MOLIT) released an unexpected lengthy press release late in the evening on the 19th. The main point was that the surge in Jeonse prices, which has made life difficult for ordinary people, is not due to the Lease Protection Act 2 but rather the Bank of Korea's base interest rate cuts.

The market responded with disbelief. It was already awkward that on the same day Lee Nak-yeon mentioned 'reflection on real estate policy,' the government immediately issued a rebuttal denying the causal relationship between the government's measures and the Jeonse market turmoil, and much of the content was hard to accept.

Experts consistently point to the government's hastily pushed policies, such as the Lease Protection Act 2, as the direct cause of the recent Jeonse shortage. The right to request contract renewal extended the effective lease period to four years, reducing available listings, and the Jeonse and monthly rent caps led landlords to raise prices, exacerbating the Jeonse shortage.

However, when MOLIT suddenly cited low interest rates as the main cause of the Jeonse shortage, even financial authorities expressed puzzlement. A financial official said, "Unlike sales, the Jeonse market is strictly formed by actual demand and supply without speculative demand," adding, "Low interest rates are not a recent phenomenon, so it is an incomprehensible explanation to suddenly claim they are the cause of the Jeonse shortage."

Many also consider it unreasonable for the government to suggest that the market will soon stabilize simply because the number of dispute consultations received by MOLIT has decreased. Complaints are pouring in both at the frontline lease sites and online, with unusual phenomena such as people lining up to view Jeonse houses or landlords demanding money to show houses, yet the government comforts itself by only citing a decrease in received complaints.

MOLIT explained that the Jeonse-to-monthly rent conversion rate has dropped to 2.5%, reducing incentives to switch from Jeonse to monthly rent, and that increases in deposits and monthly rents are limited to a 5% cap, but these apply only to existing contracts. In the market, landlords are raising deposits or converting to monthly rent in new contracts, but MOLIT remains silent on this issue.

MOLIT has previously often blamed multi-homeowners, statistical loopholes, the media, and frontline real estate agencies for market confusion. In the press release that day, it expressed regret over "repeatedly distorted data being presented as evidence," directing criticism at the media. Ultimately, nowhere in MOLIT's explanation that day was there a responsible attitude from the real estate policy control tower toward the Jeonse crisis.