On Jan. 1, the average monthly rent for apartments in Seoul surpassed 1.5 million won, setting a record high. Analysts said tighter policies on owners of multiple homes, stricter jeonse loan regulations, and a decrease in move-in supply reduced jeonse listings and accelerated the trend of "jeonse turning into monthly rent."
According to the Korea Real Estate Board (REB) on Mar. 8, the average monthly rent for apartments in Seoul in January was 1,504,000 won, hitting a record high. The apartment monthly rent price index also reached 104.59, the highest level since statistics began in 2015.
Including key-money-backed monthly rents (banjeonse), the share of monthly rent exceeded half of all lease contracts this year. An analysis of the Ministry of Land, Infrastructure and Transport's open actual transaction system showed that of 19,313 newly reported lease contracts from Jan. 1 to on the 6th, 10,033 were monthly rent contracts, accounting for 52% of the total. Last year, monthly rent made up 47.1% of new apartment lease contracts in Seoul.
It appears this is because loan regulations last year lowered the 1-homeowner jeonse loan limit to 200 million won and applied the debt service ratio (DSR), limiting the ability to raise jeonse deposits and prompting more people to choose monthly rent.
Also, as all of Seoul was designated a land transaction permit zone, listings from gap investors that had supplied jeonse decreased, and starting this year, government policies encouraging the disposal of multiple homes—such as ending the grace period on heavier capital gains taxes for multiple-home owners—are seen as having affected the decline in jeonse supply and the rise in monthly rent.
Park Won-gap, senior real estate expert at KB Kookmin Bank, said, "The shift to monthly rent fundamentally stems from jeonse scams undermining trust in the jeonse system, and from upward synchronization in which both sale prices and jeonse prices rise, increasing banjeonse and leading to a shortage of jeonse supply," adding, "Another pillar expanding the monthly rent market is the change in perception toward investing money in financial assets rather than tying it up in jeonse."