Decrease in Jeonse Listings and Increase in Monthly Rent Listings
Leading to Changes in Actual Transaction Proportions... Rise in Banjeonse and Monthly Rent Increases Burden
Low Interest Rates and Property Tax Hikes Combine to Expand Landlords' Tax Burden Transfer
[Asia Economy Reporter Onyu Lim] Mr. A, who was living in a jeonse lease in an apartment in Daechi-dong, Gangnam-gu, Seoul, recently reluctantly agreed to pay a monthly rent of 700,000 won. This was due to the landlord's threat, "If you don't raise the jeonse deposit by 400 million won, I will live in the property myself." Mr. A decided to convert the apartment he leased out in Eungbong-dong, Seongdong-gu from jeonse to a semi-monthly rent to cover part of the monthly rent. He said, "With the increasing burden of property tax, this is the only way to lower the monthly rent."
It has been revealed that the shift from jeonse to monthly rent has accelerated during the nine months since the implementation of the new lease protection law, including the right to request contract renewal and the cap on rent increases.
According to Apartment Real Transaction, a real estate big data company, as of the 6th, jeonse listings for Seoul apartments accounted for 22,155 cases (58%), while monthly rent listings (including semi-monthly rent) accounted for 16,023 cases (42%). On July 31 of last year, when the new lease law was implemented, the proportions were 62.2% (38,427 cases) for jeonse and 37.8% (23,340 cases) for monthly rent. In about nine months, the share of monthly rent increased by 4.2 percentage points.
This phenomenon has led to changes in the actual proportion of lease contracts. According to the Seoul Real Estate Information Plaza, from August last year to last month, the proportion of semi-monthly and monthly rent transactions among apartment leases in Seoul was 34.1%. This is an increase of 5.7 percentage points from 28.4% in the nine months before the new lease law was implemented.
In the year before the new lease law was enacted, the proportion of semi-monthly and monthly rent exceeded 30% only once (32.6% in April last year). However, in the nine months after the law's implementation, the proportion never fell below 30%. In November last year, it even surpassed 40%.
Although the government introduced the new lease law to strengthen tenant rights, it is analyzed that it instead triggered a sharp rise in jeonse prices, and combined with low interest rates and increased property taxes, accelerated the shift from jeonse to monthly rent. More landlords are raising monthly rent instead of jeonse deposits to reduce tax burdens. Tenants, facing difficulty in finding jeonse, ultimately have no choice but to reluctantly opt for semi-monthly or monthly rent. As a result, life as a tenant has become more difficult after the new lease law.
On the ground, concerns are growing that the shift from jeonse to monthly rent will worsen as official property prices rise sharply. A representative from real estate agency B in Ahyeon-dong, Mapo-gu said, "If official property prices surge and property taxes increase further, more landlords will try to convert jeonse to monthly rent."
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