[Home Tech] Growing Challenges of Monthly Rent Living... Urgent Need to Supplement the Lease Protection Act

Preference for Monthly Rent Rises in Non-Apartment Housing
Deposits for Row Houses and Multi-Family Monthly Rentals on the Rise
Need for Protection Against Loopholes Like Increased Maintenance Fees

Editor's NoteMore than 70% of the assets of Korean citizens are tied up in real estate. A home is our most important asset and the closest, coziest place to us. While living tied to a home, we provide the information needed to buy and sell houses. Asia Economy publishes [JipTech] every three weeks with Kim Hyoseon, Senior Real Estate Specialist at NH Nonghyup Bank, to fill you in with the necessary knowledge.

"In Hanyang’s rented house, the garden is empty (漢陽賃屋園院空), yet every year, all kinds of flowers bloom in vivid colors (年年雜樹開繁紅)" (Collected Works of Toegye)

Toegye Yi Hwang, from Andong, Gyeongbuk, wrote a poem upon seeing apricot blossoms blooming in the garden of a rented house. Like Yi Hwang, officials who came to Seoul for government service mostly lived in rented rooms until they accumulated wealth to purchase a home. Since then until now, renting has been broadly divided into jeonse (key money deposit lease) and wolse (monthly rent lease). As of December last year, the volume of jeonse and wolse transactions (Ministry of Land, Infrastructure and Transport housing statistics) exceeded 200,000 cases. Jeonse transactions accounted for 86,032 cases (39.5%), and wolse transactions were about 131,939 cases (60.5%). Compared to the same period in 2023, jeonse transactions decreased by 8.7 percentage points, while wolse transactions increased by 12.6 percentage points.

Apartments tend to prefer jeonse, while non-apartments favor wolse. As of last year, the share of jeonse transactions in apartments was 58.01%, up 2.11 percentage points from 2022. For row houses and multi-family houses, wolse holds the majority. The share of wolse transactions increased by 15.04 percentage points from 2022 to 54.55%, making wolse transactions dominant. This trend became more pronounced after the 2022 jeonse fraud incidents. While apartments saw an increase in jeonse share, row houses and multi-family houses experienced a decline in jeonse share. The proportion choosing wolse over jeonse increased, especially in multi-family and villa rentals, which had been hotspots for jeonse fraud.

As transactions increased, prices also rose. Preferences for lease types significantly influenced trends in rental deposits and monthly rents. It was expected that the introduction of the two lease laws in July 2020, including the rent ceiling system, might somewhat reduce this trend. However, examining the period after the system’s implementation shows that although price fluctuations due to supply-demand balance are not immediately reflected, they are incorporated before or after, resulting in an overall trend similar to that before the system was enacted.

Looking at the average actual transaction prices of jeonse and wolse by housing type in Seoul, the average apartment jeonse deposit last year was 572.33 million KRW, an increase of 90.52 million KRW from 481.81 million KRW in 2022. In contrast, the wolse deposit in 2024 was 203.9 million KRW, rising only 11.38 million KRW from 192.52 million KRW in 2020. Compared to 2022 (216.47 million KRW), it stands at about 94.2%.

For row houses and multi-family houses, jeonse deposits declined after the jeonse fraud incidents, while wolse deposits increased. The jeonse deposit was 230.2 million KRW last year, up 10.26 million KRW from 2020 but 6.66 million KRW lower than in 2022. The wolse deposit was 88.13 million KRW last year, 31.54 million KRW higher than 56.59 million KRW in 2020. Compared to 2022 (66.38 million KRW), it surged by 133%.

Although housing types differ according to demand, both jeonse and wolse have shown sharp increases. Either way, housing costs have risen significantly. The number of high-priced wolse contracts is also increasing. In Seoul apartments, the number of monthly rent contracts over 5 million KRW reached 1,423 in 2024, a 6.1-fold increase compared to 2020. In Seoul row houses and multi-family houses, contracts over 5 million KRW rose from 13 in 2020 to 150 in 2024, an 11.5-fold increase, and contracts over 1 million KRW reached 8,341 in 2024, about five times more than in 2020.

This year, the burden of housing costs is expected to grow further. Especially for wolse, irregular transactions exceeding the 5% renewal limit under the jeonse and wolse rent ceiling system are increasing due to blind spots in the three lease laws, such as management fee hikes. The hardships of living on wolse are likely to intensify. A complementary institutional reform for wolse contracts, which do not fully benefit from the protections of the three lease laws, is urgently needed. It is a time for cautious judgment by participants in the housing market in preparation for this.

Kim Hyoseon, Senior Real Estate Specialist, NH Nonghyup Bank