President's Remarks on "Jeonse Reduction as Normalization" Draw Expert Criticism: "Is the Focus Only on the Negatives?"

Experts Agree with "Current Trends"
"Need to Adjust the Pace to Suit Public Circumstances"

In response to President Lee Jaemyung's recent remarks, labeling South Korea's jeonse system as a "private lending practice unique to Korea" and expressing a critical stance, experts have agreed that such a perspective aligns with the current trends of the times. However, they also point out that any changes should proceed at a pace that takes into account the circumstances of the public.

Property listing posted at a real estate agency in Gangnam-gu, Seoul. Yonhap News.

During a press conference marking his first anniversary in office on June 8, President Lee said, "Jeonse is a type of private lending system found only in South Korea," and criticized, "Excessive lending for jeonse has been a primary factor driving up housing prices." He went on to add, "It is only natural that the supply of jeonse properties has decreased after ending the capital gains tax deferral for owners of multiple homes. This is part of the normalization process," and emphasized, "Whether it's new construction, land development, or reconstruction and redevelopment, we need to accelerate the pace of supply." The prevailing view is that the reduction in rental listings due to regulatory changes is considered an inevitable adjustment, based on the perception that excessive jeonse loans have fueled a surge in housing prices.

According to the Korea Real Estate Board, as of this week, the cumulative increase in apartment jeonse prices has reached 4.11%. This represents an almost sixfold jump compared to the 0.73% seen during the same period last year. The market is rapidly shifting towards a monthly rent-based system. Data from the Ministry of Land, Infrastructure, and Transport shows that, out of 51,196 new apartment lease contracts signed in Seoul this year, 27,719 were monthly rent contracts, accounting for 54.1% of the total.

While the government maintains its commitment to normalizing the jeonse system, there are growing concerns in the market that landlords are withdrawing jeonse listings or converting them to monthly rent, significantly increasing the housing cost burden for ordinary citizens. Kim Inman, Head of the Real Estate Economics Research Institute, noted, "In Seoul, without redevelopment or reconstruction, it is difficult to secure new housing supply. However, project progress is hampered by difficulties in obtaining relocation loans and the ongoing rental crisis." He further stated, "Every policy has both pros and cons, but the government seems to focus only on the negative aspects of jeonse. The apartment and non-apartment markets are different. If the claim is that jeonse prices are driving up sales prices, then in Gangnam, where the jeonse-to-sale price ratio is just 30%, property prices should be falling, but they are still rising. This was a phenomenon that occurred in the past when jeonse lending was suddenly expanded in a short period."

Kim also commented, "As the president said, the decline of the jeonse system can be seen as part of a broader historic trend, but the issue is the speed of this transition." He stressed, "Since half of Korea's tenants use this system, there should be a gradual, soft landing over the course of 10 to 20 years."

Ham Youngjin, Head of the Real Estate Research Lab at Woori Bank, also remarked, "While jeonse has served as a stepping stone to home ownership and has its advantages, it is also susceptible to fraud, which has led to numerous cases of damage." He added, "It is true that we are in a transitional period, but the pace of change is extremely rapid and is being felt even more acutely because it is linked to a shortage of available housing." He further emphasized, "There is a need to reduce the pain and moderate the speed of these changes."

This content was produced with the assistance of AI translation services.