The number of monthly rent contracts for Seoul dwellings signed each year has roughly doubled over the past five years. As monthly rent contracts in the housing lease market increase quickly, the phenomenon of "jeonse turning into monthly rent" is becoming more evident.
According to court Registration Information Plaza statistics on the 17th, the number of monthly rent contracts for Seoul dwellings (based on the granting of a fixed date) signed from January to October this year totaled 476,634, double the same period in 2020 (239,888). During the same period, jeonse contracts fell 23% from 341,977 to 262,500.
By year (cumulative from January to October), the number of monthly rent contracts, which was 239,888 in 2020, surged to 271,897 in 2021 and 381,837 in 2022. As jeonse shortages worsened due to strong real estate regulations at the end of the Moon Jae-in administration, monthly rent contracts increased sharply. Under the Yoon Suk-yeol administration, monthly rent contracts during the same period remained in the 370,000–380,000 range, then jumped again this year to 476,634. The growth rate from a year earlier is 24.6%.
A real estate industry source said, "When the Moon administration imposed a punitive comprehensive real estate tax on owners of multiple homes at the time, they all disposed of their properties, deepening the jeonse shortage," and added, "End users had no choice but to switch en masse to monthly rent." The Moon administration raised the comprehensive real estate tax rate for multiple-home owners to as high as 6% and increased the official price reflection ratio, which serves as the basis for calculating the holding tax, to 90%.
While the "jeonse-to-monthly-rent shift" is an irresistible trend, its pace has quickened under the current administration. In Seoul, monthly rent accounted for 64% of lease contracts signed from January to October this year. During the same period in 2020 and 2021, the monthly rent shares were 41% and 45%, respectively. The drivers include the government's tough loan regulations and the expansion of land transaction permit zones where actual occupancy is required. The government raised the bar for jeonse loans by including in the June 27 household loans regulations a reduction of the jeonse loan guarantee ratio to 80% from 90%, and through the Oct. 15 measures, it fundamentally blocked gap investing (purchasing dwellings with a jeonse tenant in place). Rising jeonse prices and jeonse fraud also played a role.
Amid this, concerns are being raised that if tax reforms such as raising holding taxes are implemented, the shift to monthly rent will accelerate further. This is because landlords facing higher tax burdens may convert jeonse to monthly rent to cover the costs. As monthly rent spreads, housing costs for ordinary people will inevitably rise. Average monthly rent is climbing quickly. According to the Ministry of Land, Infrastructure and Transport (MOLIT) actual transaction disclosure system, the average monthly rent in Seoul, which was 810,000 won in 2020, rose to 1.13 million won this year (January to October).