Next Year's Jeonse Prices May Trigger 'Reverse Jeonse' if Below Record High of 2021 [Impact of Lease 2 Laws]

After the Implementation of the Two Lease Laws,
Jeonse Prices in 2021 Reached an All-Time Peak

Despite Rising Jeonse Prices This Year Due to a Shortage of Listings,
Concerns Over Reverse Jeonse if Next Year's Prices Fall Below Those of Four Years Ago

When crossing the Banpo Bridge in Seoul, you can see new apartments, old apartments, and apartments under construction all at once in the Sinbanpo area. The new apartments on the left are Acro Riverview Sinbanpo, the low old apartments on the right are Sinbanpo 2nd Complex, and the apartments under construction in the back are the Maple Xi construction site. Photo by Younghan Heo younghan@

The recent trend in Seoul's jeonse market is 'lease extension.' Four years after the implementation of the two lease laws, as listings have dried up and prices have risen, many tenants have chosen to stay put in their existing jeonse homes. This has led to a vicious cycle where the shortage of listings drives jeonse prices even higher.

As tenants' concerns deepen, the market is focusing on whether jeonse prices will surpass the levels seen four years ago when the two lease laws were first enacted. At that time, landlords raised the jeonse deposits all at once in anticipation of being unable to increase rents for four years. In major Seoul complexes, most listings saw increases of 200 to 300 million KRW within a year.

If jeonse prices fall below the 2021 levels in the second half of this year, a 'reverse jeonse' crisis could occur. Reverse jeonse refers to a situation where the renewed jeonse price is lower than the previous contract price. In such cases, landlords must refund money to tenants when renewing the lease. Kim Hyoseon, Senior Real Estate Specialist at NH Nonghyup, predicted, "Assuming jeonse prices rise by 3% next year (the average increase rate in Seoul over the past 20 years), landlords may have to return 100 to 200 million KRW."

From the landlords' perspective, they must raise jeonse prices to survive. This market trend is likely to be the exact opposite of the original intent of the two lease laws, which aimed to extend the lease period to 2+2 years to ensure tenants' housing stability.

Kim said, "If jeonse prices surge by the second half of this year to levels similar to or higher than four years ago, concerns about reverse jeonse may disappear," but he also pointed out, "The two lease laws were introduced to guarantee jeonse price stability for four years, but if tenants still have to pay historically high jeonse prices after one full cycle, that is also ironic."

[Impact of the Two Lease Laws]
▶If next year's jeonse prices fall below the record high of 2021, a 'reverse jeonse' crisis will erupt

https://n.news.naver.com/article/277/0005453866
▶Seoul jeonse 'scarcity'... "Despite soaring house prices, lease extensions come first"

https://n.news.naver.com/article/277/0005453589