[Jibtech] What to Prepare for as Jeonse Disappears

Monthly Rent Ratio Rises in 24 Seoul Districts
High Interest Rates and Diversified Asset Management Options Are Driving Change
Shift from Jeonse to Monthly Rent Highlights Need for Stable Cash Flow
Housing Supply for Vulnerable Groups Must Be Expanded in Parallel

Editor's Note
Over 70% of household assets in Korea are tied up in real estate. A home is our most important asset and the closest, most comforting place. As so many live bound to their homes, we aim to provide the information you need for buying and selling property. The Asia Business Daily, together with Hyosun Kim, Senior Real Estate Specialist at KB Kookmin Bank, publishes [Jibtech] every three weeks to deliver the necessary expertise.

The jeonse system—a unique feature of Korea's housing culture—is rapidly disappearing. An analysis of actual transaction data for the Seoul apartment rental market in the first half of 2026 shows that in 24 out of Seoul's 25 districts, the proportion of monthly rent contracts increased. Rather than focusing solely on how much jeonse is declining in this era where monthly rent is becoming the norm, we should concentrate on what preparations are needed as the market shifts from jeonse to monthly rent.

The decline in jeonse is driven by several factors, including changes in interest rates, the aftermath of jeonse fraud, and the rise in one- and two-person households. However, the most fundamental factor is the shift in perception among market participants regarding jeonse. Jeonse is not just a simple lease contract; it is an agreement that combines the characteristics of both housing and finance, where landlords and tenants exchange rights to use a residential space and a large sum of money. Thus, when the interest rate environment changes, the jeonse market is inevitably affected. During periods of low interest rates, it made sense for tenants to deposit a lump sum for residence while landlords utilized those funds.

However, as interest rates have risen and asset management options have diversified, landlords now prefer the stable income from monthly rent over large deposits, and tenants increasingly seek liquidity rather than locking up significant amounts of money for long periods. Therefore, the recent decrease in jeonse should be understood as a process in which both landlords and tenants are recalculating the opportunity costs of capital, leading the market toward a new equilibrium.

These changes are first appearing in Seoul's downtown and areas close to workplaces. In the first half of this year, Gwangjin, Yongsan, and Mapo districts experienced the most rapid shift toward monthly rent. All three districts saw their share of monthly rent contracts rise by more than 8 percentage points. For units in the same complex, Yongsan recorded the largest increase in monthly rent in Seoul at 377,000 won, while Mapo ranked first for the rate of increase at 37.7%. The scarcity of locations near workplaces is being reflected in rental premiums.

Analyzing actual transaction prices for Seoul apartments, monthly rents rose in 21 out of 25 districts, except for Jungnang, Nowon, Yangcheon, and Yeongdeungpo. Among comparable complexes and unit sizes, the largest increases in monthly rent were in Yongsan (+377,000 won), followed by Jongno (+199,000 won), Jung (+166,000 won), Gangnam (+162,000 won), and Seocho (+156,000 won).

While in this year’s sales market, mid- and low-priced regions saw the most notable price increases due to stricter lending regulations, in the rental market, areas with high residential preference and already elevated sale prices are seeing rents rise first and by larger amounts. While the sales market is strongly influenced by policies, the rental market more directly reflects the preferences of tenants.

So, what should tenants prepare for? In a jeonse-focused market, the ability to raise a large deposit was important, but in a monthly rent-centered market, stable cash flow management becomes more critical. In particular, young professionals and one- or two-person households need financial strategies that balance the benefits of proximity to work with the burden of housing costs. As housing expenses take up a larger share of income, the choice of residence becomes not just a matter of living arrangements but an aspect of asset management.

Policy should also support market participants in adapting to the rapidly changing landscape of monthly rentals. Key strategies include expanding long-term public rentals, revitalizing private rental housing supply, and providing housing cost support for young people and seniors. Especially in non-apartment monthly rent contracts, it is common to see management fees—which fall outside the scope of the two major lease protection laws—being raised sharply each year, resulting in a substantial increase in actual monthly housing costs. Policymakers need to consider institutional protections for the most vulnerable groups in these situations.

The decline of jeonse is a reflection of broader societal trends. However, this change can present opportunities for some while imposing burdens on others. The key issue is not whether jeonse survives, but whether we can create an environment where anyone can live stably, regardless of the type of lease arrangement.

Hyosun Kim, Senior Real Estate Specialist, KB Kookmin Bank Star Advisory Group

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