[Takryucheongron] "To Solve the Jeonse Crisis, We Must First Control Soaring House Prices"

Kim Seongdal, Director of the Real Estate Construction Reform Headquarters, Citizens' Coalition for Economic Justice

On the 4th, at the auditorium of the Citizens' Coalition for Economic Justice in Jongno-gu, Seoul, Kim Seong-dal, Director of the Real Estate and Construction Reform Headquarters at the Citizens' Coalition for Economic Justice, is speaking at the press conference announcing the analysis of real estate assets of the 21st National Assembly members. Photo by Moon Ho-nam munonam@

[Asia Economy] The suffering of tenants facing continuous jeonse (long-term lease) difficulties is being reported. The government and the ruling party hastily passed and implemented the three lease laws to evade responsibility for the skyrocketing housing prices. It is true that the unprepared implementation of the new jeonse rental system has further fueled the rise in jeonse prices. However, the most fundamental cause of the increase in jeonse prices is the rise in housing prices. When the price of goods rises, it is natural that the rental price follows suit.

It is no exaggeration to say that housing prices have skyrocketed since the Moon Jae-in administration. Over the past three years, according to KB Kookmin Bank statistics, apartment prices in Seoul have risen by 52%, and overall housing prices in Seoul have increased by 34%.

How much have jeonse prices increased? The Citizens’ Coalition for Economic Justice (CCEJ) examined changes in apartment prices and jeonse prices in major apartment complexes in Seoul every January since 1993. The average price of a 30-pyeong apartment in the four Gangnam districts rose ninefold from 220 million KRW in 1993 to 2.1 billion KRW in 2020. By administration, 1.4 billion KRW of this increase occurred during the Roh Moo-hyun and Moon Jae-in administrations, accounting for 70% of the total. Jeonse prices rose most during the Lee Myung-bak and Park Geun-hye administrations. The average jeonse price for a 30-pyeong apartment in Gangnam increased eightfold from 80 million KRW in 1993 to 730 million KRW in 2020, with over a 50% increase during the Lee Myung-bak and Park Geun-hye administrations. Notably, during the Lee Myung-bak administration, jeonse prices surged despite a decline in housing prices. This is believed to be because the previous Roh Moo-hyun administration’s housing price surge resulted in a relatively low jeonse-to-price ratio, and tenants postponed home purchases amid falling housing prices, increasing demand in the jeonse market. Additionally, sustained low interest rates pushed jeonse prices higher, a trend that continued into the Park Geun-hye administration.

Changes in apartment and jeonse prices according to policies were also examined. The investigation found that periods of rising or falling apartment prices coincided with the implementation or abolition of the price ceiling system for pre-sale apartments. Introduced in the 1970s alongside the pre-sale system, the price ceiling system was maintained for decades and helped stabilize housing prices. However, due to pressure from the construction industry, regulatory easing measures led to repeated abolitions and reinstatements. The periods of rapid housing price increases during the Roh Moo-hyun and Moon Jae-in administrations coincided with the abolition of the price ceiling system. Although the Moon Jae-in administration initially promised to implement the price ceiling system, it postponed enforcement twice, and no apartments under the ceiling system have been supplied to date. Jeonse prices also rose most during periods when the price ceiling system was abolished. For example, the jeonse price of Eunma Apartments in Gangnam rose sixfold from 70 million KRW in 1993 to 500 million KRW in 2020. Particularly, during the periods of 2000?2007 and 2014?2020, when the price ceiling system was abolished and housing prices surged sharply, jeonse prices increased by 130 million KRW and 150 million KRW respectively. These increases are about twice the amount seen during periods when the price ceiling system was maintained.

Thus, jeonse prices have followed apartment prices upward, and apartment prices are influenced by government policies such as the price ceiling system. In the case of Banpo Xi, the jeonse price for a 30-pyeong unit in 2020 was 1.4 billion KRW, surpassing the apartment price of 1.2 billion KRW in 2014. If housing prices had remained at the 2014 level, jeonse prices would not have risen so sharply. Therefore, attempting to resolve the jeonse crisis while neglecting the skyrocketing housing prices is illogical. The government should stop deceiving the public with ineffective stopgap measures and present fundamental policies to fulfill the president’s promise to restore housing prices to the levels seen in the early Moon Jae-in administration. Furthermore, as tenant damages from losing tens of millions of won in jeonse deposits are increasing, it is urgent to introduce mandatory guarantees for landlords to return rental deposits.