President Lee: "Expansion of Jeonse Loans Caused Home Price Surge"...Hints at Further Regulatory Tightening

"Unlimited support drove up jeonse and apartment prices... It's time for adjustment"

President identifies "zero-capital gap investments" as a key cause of the problem

Selective support to be offered for genuine demanders such as young adults

President Lee Jae-myung indicated on July 23 that mortgage-backed “jeonse” loans have played a major role in driving up apartment prices and maintaining high housing prices, suggesting stronger regulations may be forthcoming. He also proposed an overall reduction in the scale of jeonse loan supply and guarantee ratios, while selectively supporting genuine end-users such as young people, newlyweds, and first-time renters.

President Lee Jae-myung looks at attendees requesting to speak at the National Real Estate Policy Debate held at the KBS Annex in Yeouido, Seoul, on July 23, 2026. Photo by Yonhap News

At the National Real Estate Policy Debate held at the KBS Annex in Seoul that day, President Lee stated, “Because jeonse loans are the main driver behind the surge in home prices or sustaining high prices, we must be prudent about expanding them.” He added, “Not only should new loans be restricted, but existing loans should also be subject to somewhat tighter controls.” By publicly asserting the need for further strengthening of jeonse loan regulations, President Lee raised speculation that the government’s upcoming household debt measures may include reducing loan limits and guarantee ratios for jeonse finance.

President Lee diagnosed that the previous policy of excessively expanding jeonse loans and guarantees under the pretext of stabilizing housing for low- and middle-income households pushed up both jeonse prices and property values. He said, “In order to help ordinary people secure jeonse contracts, the government made nearly unlimited jeonse loans available. But when it becomes too easy to obtain a jeonse loan, ultimately property prices rise. That is one of the key causes of the significant increase in apartment prices.” He further explained, “Jeonse prices typically account for 60–70% of home values, and only 70–80% of the jeonse deposit should have been guaranteed or financed. Instead, loans and guarantees were provided up to the full value of the home.” He added, “Ultimately, some were even able to secure loans and guarantees equal to 100% of the home price via jeonse, which led to the emergence of jeonse fraud.”

Accordingly, President Lee pointed out that when it became possible to finance jeonse deposits up to the level of property prices through bank loans and public guarantees, so-called “zero-capital gap investments”—repeatedly buying homes with no equity—spread rapidly. This, in turn, created a structure where landlords could no longer return jeonse deposits if property prices fell or if tenants could not be replaced. He said, “People with no real capital were able to control hundreds of properties using jeonse loans, so a single issue with one property could cascade into a widespread problem—that is the essence of jeonse fraud. While jeonse loans do have a role in supporting stable housing for working people, they have also become a major factor in skyrocketing home prices, which is why it is now time to recalibrate the policy.”

However, President Lee drew a line at simply reducing all jeonse loan volumes across the board. He said, “Regulation of jeonse loans must be strengthened to prevent runaway housing prices, but targeted support must also be provided based on concrete necessity for those who genuinely need it, such as young people, newlyweds, first-time renters, and low- and middle-income households.”

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