The end of jeonse is near

"Jeonse is a form of private finance unique to South Korea, and it is now fading away. A process of normalization is needed."

President Lee Jae-myung made the remarks about the jeonse market Monday at a press conference marking his first year in office, held at the Cheong Wa Dae reception hall. Lee said that "extending large jeonse loans in the past was the main driver of rising home prices" and that the practice "has been distorting the market." His comments pointed to how landlords have effectively used tenants' deposits as interest-free loans, fueling property price increases.

Jeonse listings are in fact disappearing fast. According to real estate data platform Asil, Seoul apartment jeonse listings stood at 18,574 as of Tuesday — down 26.4 percent from 25,240 a year earlier.

As listings have shrunk, so have transactions. Data from the Seoul Real Estate Information Plaza show that jeonse transactions for Seoul apartments totaled 7,247 in May, the lowest since November 2015, when 6,946 deals were recorded. Even accounting for a broader slowdown in real estate activity, jeonse's share of the rental market has contracted sharply. Jeonse accounted for 51 percent of all jeonse and monthly rent transactions for Seoul apartments in May, down 6.5 percentage points from 57.5 percent a year earlier.

On the drop in jeonse listings, Lee said that after the government ended the capital gains tax surcharge exemption for multi-home owners and told them to sell within the grace period, "many of them did sell," adding that "since properties that used to be rented out were sold instead, it is only natural that jeonse supply has declined." He was quick to add, however, that "this has not caused jeonse prices to surge," arguing that homes were bought by people without property who moved in themselves, reducing rental demand by a corresponding amount.

Yet as jeonse listings have dwindled, prices have climbed rapidly. According to the Korea Real Estate Board, the cumulative increase in Seoul apartment jeonse prices as of the first week of this month stood at 3.77 percent — roughly six times the 0.65 percent recorded over the same period a year ago. The nationwide cumulative gain of 1.99 percent also far outpaced last year's 0.04 percent. Seoul's apartment jeonse price index (January 2026 = 100) rose every month from 96.21 in April last year to 101.81 in April this year.

Whether demand has fallen by a commensurate amount is difficult to verify. New households form each year as people marry or move out of their parents' homes, and others relocate for school or work. On top of that, large-scale redevelopment relocations getting underway in key Seoul districts are expected to push additional demand into the rental market. "There is a possibility that relocation demand could push jeonse prices higher," a Seoul Metropolitan Government official said. "We are closely watching whether it becomes a burden on the rental market and will take action if necessary."

Experts caution that jeonse should not be assessed solely from the landlord's perspective but also from the tenant's. "From a tenant's standpoint, jeonse reduces monthly housing costs while allowing them to save toward buying a home," said Ham Young-jin, head of the real estate research lab at Woori Bank. "If jeonse shrinks, tenants will inevitably feel that their opportunities to build assets toward homeownership are shrinking as well."

Ham added that if jeonse prices surge sharply, tenants are more likely to opt for non-apartment housing or move to outlying areas. "Ultimately, this could go beyond a question of housing costs and become a matter of housing quality and freedom of choice," he said.

Some observers warn that regulations are accelerating the shift from jeonse to wolse so abruptly that the market could face serious disruption.

Kim In-man, director of the Kim In-man Real Estate Economic Research Institute, said that as South Korea has joined the ranks of advanced economies, the rental market is naturally moving toward monthly rent in line with global norms. "But if the transition happens gradually over 10 to 20 years, the shock can be absorbed," he said. "The problem now is that jeonse listings are shrinking rapidly because of owner-occupancy regulations such as the Oct. 15 measures."

The bigger concern is what lies ahead. With government housing policy increasingly focused on restricting non-owner-occupied properties, the decline in rental supply could accelerate further. The market also expects the "mutually beneficial rental housing" program — which grants landlords a capital gains tax exemption from the two-year owner-occupancy requirement if they raise rents by no more than 5 percent above the previous rate — to be scrapped when it expires at the end of this year, as pressure on rental operators mounts and the scheme conflicts with the current administration's owner-occupancy-first policy stance.

"As jeonse is replaced by wolse, rising housing costs will reduce household disposable income and lower living standards," said Kim Jeong-sik, an emeritus professor of economics at Yonsei University. "The possibility of wage pressure and an economic slowdown driven by weaker consumption cannot be ruled out."

By Seo Jeong-eun and Hong Seung-hee