Concerns Over Interest Rate Hikes and Jeonse Fraud... Increase in Tenants Preferring 'Wolse' Transactions

Preference for Monthly Rent Due to Lower Lump-Sum Burden, Fraud, and Non-Return of Jeonse Deposits

Proportion of 'Monthly Rent' in Moving Plans Also Increased Compared to Two Years Ago

[Asia Economy Reporter Kim Min-young] Due to reasons such as interest rate hikes and concerns over fraud involving Jeonse deposits, the number of tenants preferring monthly rent transactions over Jeonse has increased. As long as the trend of rising interest rates continues, the preference for monthly rent among tenants is expected to persist.

On the 13th, Zigbang conducted a mobile survey targeting 1,306 app users, asking both landlords and tenants about their preferred type of housing lease transaction. As a result, 57.0% of respondents said they preferred 'Jeonse' transactions. Among Jeonse tenants, 85.4% preferred 'Jeonse' transactions, and more than half of landlords (53.5%) also preferred 'Jeonse' transactions. In contrast, 62.1% of monthly rent tenants (including deposit-based monthly rent) preferred 'monthly rent' transactions.

In October 2020, 78.7% preferred Jeonse and 21.3% preferred monthly rent, but as of 2022, 43.0% preferred monthly rent transactions, nearly doubling the proportion of respondents favoring monthly rent compared to two years ago.

The 2020 survey results showed that landlords, Jeonse tenants, and monthly rent tenants all had a higher preference for 'Jeonse' transactions. However, this year, 6 out of 10 monthly rent tenants said they preferred 'monthly rent' transactions, indicating a stronger preference for monthly rent. Although the preference for Jeonse among Jeonse tenants and landlords remains higher than for monthly rent, the proportion has relatively decreased compared to two years ago. This is interpreted as being due to the increased burden of preparing Jeonse deposits amid rising interest rates and growing concerns over Jeonse deposit fraud caused by the recent spread of "empty Jeonse" cases.

Ham Young-jin, head of Zigbang Big Data Lab, explained, "Compared to two years ago, amid a weak sales market and increased loan burdens on landlords due to interest rate hikes, issues and disputes over deposit returns have increased. For tenants who find it difficult to prepare a large sum of money, the preference for monthly rent is expected to continue amid the ongoing interest rate hike trend."

Among all Jeonse and monthly rent tenants, 57.4% preferred 'Jeonse' transactions. Among respondents in their 20s and 30s, over 60% preferred 'Jeonse,' showing a higher response rate than other age groups (40-50%). By residential area, the preference for 'Jeonse' was relatively higher in the Seoul, Gyeonggi, and Incheon metropolitan areas. By household size, households with four or more members showed a higher preference for 'Jeonse.'

The main reason tenants preferred 'Jeonse' transactions was that there are no fixed monthly expenses to bear, accounting for 53.8%. This was followed by △lower interest burden on Jeonse loans compared to monthly rent (22.0%) △serving as a stepping stone to homeownership (10.1%) and others.

The proportion of tenants who preferred 'monthly rent' was 42.6%, a significant increase from 17.9% in the 2020 survey. The top reason for preferring 'monthly rent' was the lower lump-sum burden, at 40.4%. Other reasons included △less risk of losing a large sum due to fraud or non-return of Jeonse deposits (20.7%) △increased interest burden on Jeonse loans (13.5%) △possibility of short-term contracts (11.2%) and so on.

Compared to the 2020 survey, the reason 'less risk of losing a large sum due to fraud or non-return of Jeonse deposits' nearly doubled, and the proportion citing 'increased interest burden on Jeonse loans due to interest rate hikes' also exceeded 10%. These anxiety factors are analyzed to have increased the number of respondents who believe monthly rent transactions are better than two years ago.

When asked about plans to move with a lease type (Jeonse or monthly rent), a total of 1,166 respondents said they had plans. Among those planning to move, 50.9% preferred Jeonse, and 38.4% preferred monthly rent (including deposit-based monthly rent). The remaining 10.7% said they had no plans to move with a lease type. Compared to 2020, plans to move with Jeonse decreased, while plans to move with monthly rent increased.