Since the government announced the "9·7 measures," the jeonse market has been visibly unsettled. The package included tighter controls on "jeonse loans." Forecasts that "jeonse becoming monthly rent" will accelerate and jeonse listings will decline have gained traction. Some worry that landlords who previously offered jeonse may unintentionally commit jeonse fraud because they cannot raise the security deposits needed to switch to monthly rentals.
On the 8th, real estate market sources said that as the government announced the "9·7 measures," expanding supply while tightening jeonse loan rules is expected to have significant effects on landlords and tenants. Among them, analysts say that reducing the loan limit for one-home owners nationwide who take jeonse loans in the Seoul metropolitan area and regulated areas from the existing 300 million won to 200 million won could be fatal for some.
Representative cases include one-home owners in the provinces who live in the Seoul metropolitan area and tenants in school district hot spots. However, since a 300 million won limit already existed, the impact may be limited, though some may face short-term difficulty raising lump sums. According to the Financial Services Commission, among current one-home owners who have taken jeonse loans in the Seoul metropolitan area, about 30% received loans in the 200 million won to less than 300 million won range, so the loan limit is estimated to fall by about 65 million won.
A person surnamed Lee (48), who owns an apartment in Daegu, North Gyeongsang, said, "For work reasons I currently live in jeonse in Seoul and have taken the maximum loan allowed," adding, "If this regulation is applied when I renew my jeonse loan on the place I currently live, I may have to move to a place with a lower deposit or convert part of it to monthly rent."
Ham Young-jin, head of the real estate research lab at Woori Bank, said, "What the measures relating to jeonse loans essentially mean is that if ownership and residence are separated, jeonse loan limits will be reduced," adding, "The shift to monthly rent could be prominent around well-known school districts."
There is analysis that banning mortgage loans for landlords will also have ripple effects in the jeonse market. Previously, a maximum loan-to-value ratio of 60% was applied by region, allowing loans to be obtained. The government said the measure is necessary to prevent speculative demand inflows and excessive growth in household loans. But in the market, there are considerable concerns that rental businesses will contract.
Lee Eun-hyung, a research fellow at the Korea Research Institute for Construction Policy, said, "The new loan regulations can be seen fundamentally as measures to tighten lending to homeowners," adding, "Market buyers may perceive that the government is trying to reduce jeonse."
Market observers say the jeonse loan regulation card is the government's biggest weapon. If house prices rise further, measures could follow such as including jeonse loans in the debt service ratio (DSR) calculation or broadly reducing jeonse loan limits. The government sees the "60 million won mortgage loan limit" measure as effective, so such steps are feasible. The government also warned of additional measures.
Shin Jin-chang, director of financial policy at the Financial Services Commission, said in a Q&A after the announcement of the measures, "Expanding DSR application to jeonse loans has been the government's consistent position," and added, "We will decide the specific timing and method of implementing DSR for jeonse loans after considering the effects on household debt management and housing stability for low-income households."
Because jeonse loans are directly linked to low-income housing, there are many concerns about potential side effects. Since cash-rich people with strong funding mobilization capabilities are exceptions to all regulations, some point out that the price gap between areas such as the Gangnam 3 districts and Yongsan District and other regions could widen. Analysts also say the groups hit hardest by reduced loan limits will be professionals with loan repayment ability and dual-income couples, meaning the "housing ladder" is gradually being cut off.
Ham said, "From the June 27 lending restrictions, to strengthened jeonse deposit return insurance subscription in August, to the Sept. 7 measures, the level of regulation related to jeonse has been rising," adding, "With increased use of renewal rights this year, jeonse listings have fallen mainly in the Seoul metropolitan area, and with expectations of interest rate cuts leading to more monthly rentals, jeonse prices or jeonse listing declines will likely continue centered on the Seoul metropolitan area for the time being."