[Jeokjeonse Crisis] ② 'Kkangtong Jeonse' Approaches... Tenants Losing Sleep

If Housing Price Index Drops 10-20%, 1 in 8 Houses Becomes 'Kkangtong'

[Asia Economy Reporters Yu Je-hoon and Bu Ae-ri] As the base interest rate rises and the real estate market stagnates, the 'reverse jeonse' phenomenon has become widespread, and there are concerns that the even more dangerous 'empty-can jeonse' could also surge rapidly. A recent study revealed that if housing prices drop by about 10-20% over the next two years, 1 out of 8 jeonse contracts maturing in the second half of this year could turn into empty-can jeonse.

According to the financial sector on the 9th, Min Byung-chul, a research fellow at the Korea Housing Finance Institute, stated in his recently published report titled "Estimation of the Risk of Non-Refund of Deposits" that "As housing prices, which had surged sharply in recent years, decline, the likelihood of an increase in the occurrence rate of empty-can jeonse is high."

Empty-can jeonse refers to a situation where the jeonse deposit and the housing sale price are at similar levels, and the sum of the jeonse deposit and the mortgage loan secured by the house exceeds the sale price. In such cases, even if the landlord sells the house, there is a risk that the tenant will not receive the full deposit back. Compared to reverse jeonse, where the jeonse price falls or the landlord struggles to find a new tenant and thus has difficulty returning the deposit but can return it through selling the house, the risk posed by empty-can jeonse is significantly greater.

Researcher Min estimated the proportion of empty-can jeonse among jeonse contracts maturing before the end of the term by using the average transaction price of the same complex and same area over the previous three months as of July last year, then projecting housing price indices to fall by 0-10% (Scenario 1) and 10-20% (Scenario 2) over the next two years.

Among contracts maturing in the first half of this year, Scenario 1 predicts that 3.1% nationwide will be empty-can jeonse, while Scenario 2 predicts 4.6%. In Daegu, where housing prices are falling faster than in other regions, the rates are expected to be 16.9% and 21.8% respectively under each scenario. The situation worsens in the second half of the year.

The risk for contracts maturing in the second half of this year generally increases, with Scenario 1 projecting 7.5% nationwide and Scenario 2 projecting 12.5% empty-can jeonse. Particularly under Scenario 2, Daegu's probability of empty-can jeonse reaches 33.6%, or about 1 in 3 cases.

Other regions with high probabilities compared to others include Gyeongbuk (32.1%), Chungnam (31.3%), and Ulsan (30.4%). Chungbuk (26.8%), Jeonbuk (25.1%), Gyeongnam (20.7%), Gwangju (19.3%), Daejeon (19%), Jeonnam (16.9%), and Gangwon (14.6%) also exceed the national average. However, Seoul's probability remains relatively low at 1.9% (Scenario 1) and 2.9% (Scenario 2).

Researcher Min advised, "If countermeasures for the empty-can jeonse problem focus solely on deposit return guarantees, most of the risk could be transferred to guarantee institutions. It is necessary to continuously consider multifaceted responses such as the Ministry of Land, Infrastructure and Transport's rights to verify senior tenant information and delinquency information."