[The Editors' Verdict] Next Year’s Jeonse Crisis Is Coming

Every March, just before the school admission season, there is a chronic shortage of jeonse properties. Many people, braving the cold, go house-hunting in search of a place to live. However, these days, even before the traditional moving season has started, people everywhere are saying that "finding a jeonse property is like picking stars from the sky."

This is the result of a sharp decline in jeonse listings. Compared to the beginning of this year, one out of every four jeonse properties in Seoul has disappeared. According to real estate information platform Asil, the number of Seoul apartment jeonse listings decreased from 31,814 on January 1 to 23,828 on October 22.

The policy of designating all of Seoul and key areas in Gyeonggi Province as Land Transaction Permission Zones (LTPZ) in an attempt to control housing prices has dried up the supply of jeonse properties. When a house is purchased, the owner is required to live there for two years, making it impossible to lease it out as jeonse.

As it becomes harder to find available properties, more people are choosing to stay in their current jeonse homes. From October 16 to December 22 this year, there were 3,202 cases of jeonse contract renewals in Seoul's three Gangnam districts, a 47% increase from the previous year. In contrast, the number of new jeonse contracts fell by more than 32%.

If the supply of jeonse properties from existing homes has sharply declined, then at least the supply from new homes should increase. However, next year, the number of new apartment units scheduled for occupancy in Seoul (according to Zigbang) is 16,412, which is only 51% of this year's 31,856 units. In eight of the 25 districts-Gangbuk, Gwanak, Geumcheon, Nowon, Seongdong, Yongsan, Jongno, and Jung-gu-there will be zero new units available.

With supply contracting across the board, jeonse prices are on the rise. This year, Seoul’s jeonse prices (according to the Housing Industry Research Institute) rose by 3.0%, and next year they are expected to jump by 4.7%. Even if you manage to find a decent property, the high deposit makes it increasingly difficult to secure a home.

Lowering expectations to consider villas is also unappealing due to widespread fears of jeonse fraud. Public rental housing is not an option for many due to eligibility requirements. As a result, many are forced to turn to the monthly rental market despite the burden of higher housing costs. However, the burden of monthly rent is also significant. According to the Korea Real Estate Board, the monthly rent growth rate for Seoul apartments rose from the 0.2% range between May and August to 0.3% in September. It then jumped to 0.64% in October and 0.63% in November, following the announcement of new policies. From January to November this year, Seoul apartment monthly rent increased by 3.29%, surpassing the 3% annual growth rate for the first time since records began in 2015.

With people anxiously waiting, if the spring moving season arrives, a "jeonse crisis" will erupt. In fact, the numbers already indicate a crisis. In December, KB Kookmin Bank's jeonse supply-demand index for Seoul was 159.8, and for Gyeonggi Province, it was 160.4. This is the first time in over three years-since October 2021-that Gyeonggi’s index has exceeded 160. Incheon also recorded 164.5. An index above 100 means demand exceeds supply, and above 150 signals a jeonse crisis.

Real estate policies aimed at stabilizing housing prices are instead fueling anxiety among ordinary people about their housing situation. In this context, the government’s decision to postpone additional housing supply measures and reforms for Korea Land & Housing Corporation (LH), which is expected to play a key role in public housing, until next year is incomprehensible.

The government needs to send a strong signal of its commitment to housing supply in order to stabilize the jeonse market. Even targeted adjustments, such as lifting LTPZ designations in areas where housing prices are not soaring, or easing jeonse loans for young people and newlyweds without homes, should be considered. Ensuring that ordinary people have a place to live must be the top priority. With local elections coming up next year, there is nothing more important than this.