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Finance Ministry to unveil new counterstep to rising jeonse prices this week

(Yonhap)
(Yonhap)

The government is slated to unveil a set of additional real estate policies as early as this week, according to the Ministry of Economy and Finance and related agencies on Sunday. The goal is to ease a supply shortage of “jeonse” apartments sparked by recently introduced tenant protection laws. 

Jeonse is a housing lease system unique to Korea whereby tenants pay a lump-sum deposit instead of monthly rent on a two-year contract.

The planned measure, the 24th of its kind, will focus on ways to supply more homes, including public rental accommodations, under strict property rules that protect tenants from soaring real estate prices. Under the new laws, tenants can insist on extending a two-year jeonse deal for another two years, and upon renewal landlords can raise the rent by no more than 5 percent.

The housing supply rules came in response to a chorus of criticism over the shortage of jeonse listings after the legislation passed in July, when more landlords began offering monthly rental contracts instead of jeonse contracts.

This month so far an average of 9,186 jeonse rentals were offered per day, an 80 percent decrease over the 41,580 offers a day in July last year. This has led to a surge in jeonse apartment prices, with jeonse prices in Seoul having risen 0.21 percent on-week in the third week of October. That marked the sharpest growth since 2015, which saw a 0.23 percent rise in the same period, industry data showed.

"Instead of drafting a whole new framework, the government will come up with supplementary policies that ease some side effects of the current tenant protection laws. At present, discussions are underway to expand housing supply," a Finance Ministry official said.

In an effort to reduce the financial burden on tenants, authorities are also proposing to expand tax credits for monthly rent.

Currently, non-homeowning households with an annual gross salary of 70 million won ($62,000) or less, or those living in homes worth 300 million won or less based on standard market prices, can claim tax deductions of up to 7.5 million won per year.

By Choi Jae-hee (cjh@heraldcorp.com)
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