The rental market is in turmoil due to the high-intensity lending restrictions outlined in the June 27 measures. As loans for jeonse (lease) become unavailable or their limits reduced, a trend toward 'monthly rent' is rapidly progressing. The use of the 'renewal right,' which limits the deposit increase rate to within 5%, has also declined, and landlords are showing a preference for so-called 'moneyed tenants' who do not take out jeonse loans. Experts are concerned that, ultimately, rents will rise, increasing the burden on tenants without housing.
According to the real estate industry on the 20th, the regulations related to jeonse loans from the June 27 measures announced last month are having a widespread impact on the rental market. This measure prohibits the 'jeonse loan conditional upon transfer of ownership' when purchasing a dwelling or moving into a newly built dwelling in regulated areas. Additionally, the guarantee ratio for jeonse loans has been tightened from the existing 90% to 80%, and the limits for the policy jeonse loan, known as the buffer loan, have been reduced.
Since the announcement of the measures, the 'monthly rent' trend is rapidly advancing in the rental market. According to the real estate big data platform, Asil, the number of monthly rental listings in Seoul reached 19,349 as of the previous day, a 2.9% increase from 18,796 on June 27, when the measures were announced. In contrast, the number of jeonse listings decreased from 24,855 to 24,741 during the same period, a decline of 0.5%.
This phenomenon has been particularly pronounced in major complexes in Seoul where transactions are high. In the case of Helio City in Songpa District, the number of jeonse listings decreased from 307 on June 27 to 229 on the 15th of this month, a 25.5% decline. Nearly 100 listings disappeared in about 20 days. Conversely, the number of monthly rental listings increased from 323 to 388 during the same period, a rise of 20.1%.
There is also a growing atmosphere of delaying the use of the renewal right. When tenants utilize the renewal right, the rent increase rate is limited to within 5%. However, the number of times it can be used is limited to once, making additional re-contracts difficult.
According to the real transaction disclosure system of the Ministry of Land, Infrastructure and Transport, a total of 7,035 lease contracts in Seoul were reported from June 28 to the 15th of this month. Of these, 3,018 were renewal contracts, with 1,626 utilizing the renewal right. It appears that half of the renewal contracts did not use the renewal right and have significantly increased prices.
In Mokdong New Town 1, a dedicated 154㎡ unit signed a renewal contract at 1.15 billion won (13th floor) on the 14th, but did not use the renewal right. A similar unit was contracted for 997.5 million won on May 31. In Dogok Lexel, a dedicated 85㎡ unit signed a jeonse renewal contract at 1.5 billion won (16th floor) on the 10th. This was also a re-contract without using the renewal right, with the previous lease price on June 27 being 1.26 billion won.
Nam Hyuk-woo, a researcher at Woori Bank's WM Sales Strategy Department, said, "If the trend toward monthly rent accelerates and jeonse listings decrease, jeonse prices could rise," adding, "Delaying the use of the renewal right reflects tenants' psychology that prices might increase in the future."
There is also a trend of preferring tenants with financial capability who do not take out jeonse loans. This phenomenon mainly occurs in rental markets, influenced by factors such as the mortgage limit of 600 million won and the ban on jeonse loans conditional upon transfer. Until the measures were announced, many landlords moved in to fill the residency requirement considering future capital gains tax. However, with the balance loans also limited to a 600 million won cap, financially strained landlords are finding it difficult to move in. Landlords hoping to have jeonse tenants to cover their balances now must choose tenants who do not require jeonse loans.
A representative case is the Maple Xi development in Seocho District, which began moving in at the end of last month. This large complex, consisting of a total of 3,307 households, had 3,402 rental listings confirmed as of the 15th. This includes overlapping listings of jeonse, half-jeonse, and monthly rent. Among these, there were 1,859 jeonse listings and 1,543 monthly rental listings. A representative from a real estate agency in Jamwon-dong stated, "As jeonse loans are restricted, many existing jeonse listings have turned into half-jeonse listings," adding, "Landlords seeking jeonse tenants are looking for tenants who won't take out jeonse loans, even if it means lowering the rent." The lowest asking price for jeonse in Maple Xi's 84㎡ units is reported to be around 1.4 billion won, indicating a decrease of up to 400 million won compared to before the measures.
Jo Young-gwang, a researcher at Daewoo E&C, stated, "With the ban on jeonse loans conditional upon transfer, landlords naturally prefer tenants who do not take out jeonse loans," adding, "For those without housing, jeonse becomes a means to save money for future home ownership, but this path is narrowing."
Researcher Nam Hyuk-woo noted, "If landlords prefer financially capable tenants, a polarization phenomenon may occur in the rental market in the future," adding, "It is possible that rapid sales of pre-sale rights and declines in jeonse prices will appear in suburban areas rather than in major areas where relatively wealthy tenants reside."