[비즈한국] In the third quarter of this year, the proportion of jeonse (lump-sum housing lease) contracts in Seoul's apartment lease market exceeded 60%, signaling a significant shift in the housing market. According to an analysis of the Ministry of Land, Infrastructure and Transport's actual transaction system, the share of jeonse transactions reached 62.5%, representing a meaningful upward trend compared to recent quarters.
Furthermore, while there has been an increase in renewal contracts—where tenants renew leases with existing landlords after expiration—there is a peculiar phenomenon where the usage rate of the "right to request lease renewal" (renewal right) is actually decreasing. This is interpreted as a complex result of rising jeonse demand and shifts in the financial loan environment.
Under these circumstances, I would like to summarize the current market conditions to forecast the real estate outlook for late 2024 and beyond. Ultimately, let’s examine the impact of real estate policies, such as mortgage regulations, on the housing market and consider long-term, sustainable measures to resolve these issues.
First, let’s summarize the current real estate market situation.
First, the market is seeing an increase in the proportion of jeonse contracts. Let’s look at the background behind this.
The fact that the share of jeonse contracts for Seoul apartments topped 60% in the third quarter reflects not just increased demand for jeonse, but structural changes in the overall housing market. The main factors behind the rise in jeonse contract shares can be divided into two categories.
The first factor is the rise in jeonse demand. As Seoul apartment prices have surged, purchasing a home through a sale has become increasingly difficult. Consequently, many citizens who do not own a home are choosing jeonse. As demand shifts from home purchases to jeonse, the proportion of jeonse contracts has risen. This trend is particularly notable among the middle class and younger generations seeking housing stability, creating a vicious cycle where their preference for jeonse accelerates the rise in jeonse prices.
The second factor is changes in the financial market. With commercial bank loan interest rates becoming lower than the jeonse-to-monthly-rent conversion rate, demand for taking out loans to fund a jeonse deposit has grown. This has reinforced the tendency for households without sufficient assets to secure jeonse funds through bank loans. This shift in the financial environment is acting as a key driver for higher jeonse demand despite ongoing loan regulations.
Second, the market is experiencing an increase in renewal contracts alongside a decrease in the use of renewal rights.
As jeonse prices skyrocket, more tenants are opting to continue living in their current homes by renewing contracts with their existing landlords. This stems from the judgment that, given the surge in jeonse prices, maintaining an existing contract is more economically advantageous for the tenant than signing a new one.
Conversely, the usage rate of the "right to request lease renewal" is steadily declining. This right allows a tenant to demand an additional two years of residence with the existing landlord, with rent increases capped at 5%. However, since this system can only be used once within the contract period with the same landlord, tenants who have already exercised this right cannot use it again when renewing.
From the landlord’s perspective, replacing a tenant incurs incidental costs such as brokerage fees and expenses for wallpaper and flooring replacements. Therefore, they often find it more advantageous to maintain a renewal contract with an existing tenant rather than finding a new one. As a result, there is an increase in renewals occurring without the formal exercise of the renewal right.
Third, there is the issue of confusion regarding loan regulations and the protection of real-demand buyers.
Recently, as financial authorities have tightened loan regulations to curb the surge in household debt, confusion has emerged in the loan market. Because the criteria for distinguishing between real-demand buyers and speculative demand have become ambiguous, even genuine homebuyers are facing hurdles where they must prepare extensive evidentiary documents. Since each bank defines "real demand" differently, cases arise where the same individual can obtain a loan at one bank but is denied at another.
In this situation, consumers are feeling anxious, and the accessibility of loans for actual buyers has significantly decreased. While loan regulations were introduced with the goal of stabilizing housing prices, they are producing the side effect of increasing the financial burden on genuine homebuyers.
Fourth, the market is characterized by policy confusion and the polarization of the real estate market.
Alongside loan regulations, the government is creating various exceptions to its real estate policies to protect genuine buyers. However, these regulations are frequently being revised, causing confusion in the market. In particular, the tightening of loan regulations has paradoxically led to a surge in housing transactions in the metropolitan area, ultimately driving up housing prices.
This polarization of the real estate market is placing a greater burden on vulnerable housing groups, and the price gap between regions is widening. In particular, the widening price gap between Seoul and other provinces is accelerating the overheating of the housing market centered around the capital region.
By summarizing the current real estate market into these four points, I have outlined the problems of concern for the future.
In conclusion, the increase in the share of Seoul apartment jeonse contracts and the expansion of renewal contracts in the third quarter of 2023 reflect complex structural changes in the housing market. The rise in jeonse demand, shifts in the financial market, and the strengthening of loan regulations have triggered these changes, significantly affecting contract practices between tenants and landlords. In particular, the decline in the use of renewal rights is pointed out as a potential problem that could threaten tenants' future housing stability.
The confusion surrounding loan regulations and real estate policy is failing to achieve its original purpose of protecting genuine buyers, instead fueling market polarization and housing price hikes. Accordingly, the government needs to design loan regulations and policies more meticulously and strengthen support for genuine buyers and housing-vulnerable groups.
Ultimately, stabilization of the housing market can be achieved through long-term supply expansion and policy consistency. Expanding supply is the most effective way to stabilize housing prices, and policy consistency can reduce market confusion and alleviate the burden on genuine buyers. The government should focus on developing these long-term measures to resolve the structural problems of the housing market.
Kim Hak-ryeol, head of the Smart Tube Real Estate Research Institute and famous by his pen name "Pashong," previously served as a team leader at the Real Estate Research Division of Gallup Korea. He operates and hosts the Naver blog "Pashong's World Exploration" and the YouTube channel "Stube TV." He is the author of books such as "Absolute Principles of Seoul Real Estate (2023)," "The Future of Incheon Real Estate (2022)," "Kim Hak-ryeol's Absolute Principles of Real Estate Investment (2022)," "Future Map of Korea Real Estate (2021)," "From Now On, Only Rising Places Will Rise (2020)," and "Korea Real Estate User Manual (2020)."