Finding Jeonse Homes Becomes 'Like Picking Stars from the Sky'… Tenants Opt for Contract Renewals

The supply shortage trend in the Seoul apartment jeonse (long-term deposit rental) and monthly rent market continues to intensify.

The jeonse supply-demand index has reached levels last seen in 2021, when the jeonse market was in severe turmoil, and the supply-demand balance for monthly rentals has also deteriorated significantly of late.

According to the Korea Real Estate Board, the Seoul apartment jeonse supply-demand index for the second week of June (as of June 15) stood at 122.5, the highest level in approximately five and a half years since it hit 122.8 in the third week of February 2021.

The supply-demand index is a score based on the ratio of supply and demand. With 100 as the baseline, a figure closer to 200 indicates that there are more people looking for homes than those offering them, while a figure closer to 0 indicates the opposite.

The year 2021 was a period when jeonse prices surged significantly as new listings dried up following the implementation of the two major lease laws—the right to request contract renewal and the cap on rent increases—in July of the previous year.

This year's weekly jeonse supply-demand index has been on a continuous upward trend since reaching 103.2 in the first week of March, clearly reaching the levels seen in late 2020 to early 2021, when jeonse market indicators were severely strained.

Along with jeonse, the supply-demand balance for monthly rentals is also showing a trend of deterioration.

The monthly rent supply-demand index, which is published on a monthly basis, reached 114.8 in Seoul last month, an increase of 5.1 points from the previous month.

While the monthly increase rate had generally hovered around 1 point earlier this year, it jumped significantly in May.

Analysts attribute this to a combination of factors: the reduction in housing starts from 2022 to 2023 leading to a shortage of new move-in supplies with a time lag, and multi-homeowners selling their properties before the expiration of the grace period for heavy capital gains taxes this year, which has led to a decrease in jeonse and monthly rental listings.

According to data released by the Korea Real Estate Board and Real Estate R114 in February of this year, the number of new apartment move-ins in Seoul is projected to be 27,058 households this year, with a sharp decline to 17,197 households expected next year.

As tenants find it increasingly difficult to secure rental properties, more are choosing to renew their existing contracts, further narrowing the room for new jeonse and monthly rental listings to enter the market.

According to the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system, out of 23,180 jeonse and monthly rental transactions for Seoul apartments from May 1 to June 19, 11,366 were contract renewals, accounting for 49.0%.

During the same period last year, renewals accounted for approximately 37% of the 36,753 total transactions, showing a significant increase to nearly half of all contracts.

Based on cumulative data from January of this year, renewals accounted for 47,792 out of 105,302 jeonse and monthly rental transactions in Seoul, or 45.4%, which is a 9.2 percentage point increase compared to 36.2% during the same period last year.

According to the Korea Real Estate Board, the cumulative increase rate for Seoul apartment jeonse prices through May of this year was 3.58%, about six times the 0.60% recorded during the same period last year, while the monthly rent increase rate was 3.37%, about 4.3 times the 0.78% recorded during the same period last year.

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.