Seoul's Jeonse Rental Market Tightens, Creating Hundred-Million-Won Price Gaps

The jeonse rental crisis for Seoul apartments is intensifying. Soaring jeonse prices, driven by a supply shortage relative to demand, are creating price gaps of hundreds of millions of won between new and renewed contracts.

In a large apartment complex of 2,000 units in Seongbuk-gu, Seoul, a jeonse contract for a 59-square-meter unit was signed at 750 million won, over 400 million won higher than a renewal contract for the same-sized unit last month. A real estate agent in Gireum-dong, Seoul, reported that the jeonse price for an 84-square-meter unit, which was around 800 million won at the start of the year, recently rose to the 1.1 billion won range, with monthly rents reaching 3 million won.

The number of jeonse listings for Seoul apartments has fallen sharply by over 23% year-on-year to approximately 19,000. The decline in available jeonse units is particularly pronounced in mid-to-lower-tier areas on the outskirts of Seoul, where jeonse prices are also skyrocketing. This year, jeonse prices in Seongbuk-gu have cumulatively risen by 6.65%, while those in Nowon-gu and Gwangjin-gu have increased by around 6%.

The government attributes the instability in the jeonse market to a decrease in housing supply resulting from past shortages. Experts, however, point to factors such as the strengthened regulations on owner-occupancy requirements and loan restrictions as major causes of the jeonse crisis.

Seo Jin-hyeong, a professor of real estate law at Kwangwoon University, stated that the sharp rise in jeonse prices is pushing up sale prices, and tenants unable to afford the higher jeonse rates are shifting to the monthly rental market, inevitably leading to an increase in monthly rent prices. President Lee Jae-myung commented on the jeonse crisis, saying that jeonse is a form of private finance unique to Korea that is gradually disappearing and requires a normalization process, making the decrease in jeonse supply inevitable.

Amidst the deepening jeonse crisis, there are growing calls for measures to ease the housing cost burden on ordinary citizens and ensure a soft landing for the market.