The average price for “jeonse,” one of the most common housing lease systems in Seoul, steeply increased, running counter to the government’s efforts to cool the heated real estate market and protect tenants.
The average price of jeonse in the capital city rose by 7.5 percent from 510 million won ($449,000) in August to 536.7 million in October, according to KB Kookmin Bank’s real estate services platform Liiv On. Jeonse refers to a minimum two-year least contract with a lump-sum deposit, not monthly rent.
The government rules that set a maximum rent hike of 5 percent and allow the extension of a jeonse contract for four years are thought to have caused a bottleneck on the supply side, according to market watchers. A revised law that requires landlords to live in their houses at least two years to avoid paying heavy taxes also added fuel to the fire, they said.
“High liquidity in the market thanks to low interest rates, tough tax rules, and the 5 percent cap for jeonse, among others, have caused the shortage of the long-term rents and led to increased jeonse prices,” according to the Korea Appraisal Board, a state-run agency that assesses real estate property.
Exceeding the 500 million-won mark for the first time, the median price of jeonse grew from 468.3 million won in September to 508 million won in October.
The average jeonse price for apartments measuring 86.8 square meters in Geumcheon-gu soared 11 percent, the highest among the 25 districts of Seoul. Seongdong-gu, Eunpyeong-gu, and Gangdong-gu saw increases of more than 10 percent in jeonse prices. Jeonse prices in the city grew 16.3 percent over the last two years.
By Kim Young-won (firstname.lastname@example.org