Seoul Gangseo, Incheon, and Bucheon Jeonse Tenants at Risk... Highest Number of Deposit Guarantee Incidents

Over 500 Jeonse Deposit Accident Cases Nationwide in August, Totaling 109 Billion KRW
Seoul Gangseo, Incheon Michuhol, Gyeonggi Bucheon Have Highest Accident Counts Nationwide
Ministry of Land Provides Jeonse Rate, Deposit Accident Status, and Auction Winning Bid Statistics

Source: Ministry of Land, Infrastructure and Transport

Last month, over 500 cases of jeonse deposit accidents occurred nationwide, with the total accident amount exceeding 100 billion KRW. Most incidents were concentrated in the metropolitan area, particularly in Gangseo-gu, Seoul; Michuhol-gu, Incheon; and Bucheon-si, Gyeonggi-do.

On the 14th, the Ministry of Land, Infrastructure and Transport announced that it will provide information on ▲regional jeonse price ratios ▲guarantee accident status ▲auction winning bid statistics to be used when signing lease contracts to prevent non-return of jeonse deposits. This provision of statistical information follows the joint announcements by related ministries on the 'Housing Sector Livelihood Stability Measures (July)' and the 'Jeonse Fraud Prevention Measures (September)'.

◆Jeonse Price Ratio Higher in Villas than Apartments, Making Them More Risky

First, the jeonse price ratio is the ratio of the jeonse price to the sale price, calculated by analyzing actual transaction data of sales and jeonse for apartments and multi-family/row houses in the respective area.

To allow checking recent market trends such as the rise in jeonse price ratios in the area, the jeonse price ratios for the past year (September 2021 to August 2022) and the recent 3 months (June to August) are provided. Nationwide data is available at the city/county/district level, and in the metropolitan area down to the town/township/neighborhood level.

The Ministry explained, "The higher the jeonse price ratio, the greater the risk of not being able to recover the jeonse deposit if sale prices fall, so it is necessary to refer to the jeonse price ratio of the area before signing a jeonse contract."

According to the Korea Real Estate Board, based on the recent 3 months, the jeonse price ratio for apartments is 74.7% nationwide, 69.4% in the metropolitan area, and 78.4% in non-metropolitan areas. For multi-family/row houses, it is 83.1% nationwide, 83.7% in the metropolitan area, and 78.4% in non-metropolitan areas, showing a somewhat higher jeonse price ratio for multi-family/row houses compared to apartments.

◆Jeonse Deposit Accidents Frequent in Gangseo-gu, Seoul and Incheon

Statistics on accidents related to the 'Jeonse Deposit Return Guarantee' product, which compensates for jeonse deposits when tenants cannot recover their deposits after the lease contract ends, are also provided.

According to the Housing and Urban Guarantee Corporation (HUG), in August alone, a total of 511 guarantee accidents amounting to 108.9 billion KRW occurred across 75 local governments, with the national average guarantee accident rate calculated at 3.5%.

By region, guarantee accidents were frequent in the metropolitan area, including Gangseo-gu, Seoul (60 cases, 9.4%), Michuhol-gu, Incheon (53 cases, 21.0%), and Bucheon-si, Gyeonggi-do (51 cases, 10.5%).

The Ministry stated, "In areas with many guarantee accidents and high accident rates, it is necessary to carefully examine the rights related to the property, surrounding sale and jeonse market prices, and whether the landlord has any tax arrears to avoid signing risky contracts." It added, "After signing the contract, it is important to secure priority repayment rights through lease registration (which automatically grants a fixed date) and moving-in registration, and to be especially cautious by subscribing to jeonse deposit guarantee products."

◆In Worst Cases, Recoverable Deposit Amount Can Be Estimated by Auction Winning Bid Ratio

Using court auction information, the number of auctions, number of successful bids, and winning bid ratios for housing by region can also be checked.

Auction winning bid statistics serve as indicators of the real estate market situation, and when a property is auctioned due to landlord default or bankruptcy, tenants can estimate the amount of deposit they may recover.

The nationwide average winning bid ratio for the recent 3 months is 82.7%, which is 3.5 percentage points lower than the 1-year average winning bid ratio of 86.2%.

The statistical information provided this time can also be downloaded from the Korea Real Estate Board’s Real Estate Tech website. To ensure easy access for everyone, a separate menu will be established on the Real Estate Tech website by the end of September, with regular updates planned for the middle of each month.

Additionally, the Ministry plans to comprehensively review regional jeonse price ratios and guarantee accident statuses and notify relevant local governments separately by September for areas where jeonse damage is a concern, supporting local governments in inspecting market risk factors, especially focusing on newly built villas.

Furthermore, to prevent tenants from signing contracts for risky properties, the Ministry will strengthen preventive activities such as distributing key checklists and promotional materials for protecting jeonse deposits through local governments, licensed real estate agents, and banks.

Cases suspected of jeonse fraud will be analyzed and provided to the National Police Agency, and investigations will be requested directly if necessary to manage and prevent non-return of jeonse deposit damages.

Kim Hyo-jung, Director of Housing Policy at the Ministry, said, "We hope the statistics provided this time will be useful for tenants searching for jeonse homes to avoid risky contracts and prevent deposit damages," adding, "We will faithfully implement follow-up measures of the 'Jeonse Fraud Prevention Plan,' such as strengthening tenants’ opposability rights, to protect jeonse deposits, which are equivalent to the entire assets of ordinary citizens."

Meanwhile, aiming to prevent jeonse deposit damages, the Ministry is developing the 'Self-Diagnosis Safe Jeonse App (tentative name),' scheduled for release in January next year, to provide key information to consider when signing jeonse contracts, such as appropriate price levels per listing and items to check before and after contracts.