As the proportion of monthly rent in Seoul's apartment rental market surpasses 50% and the number of jeonse listings rapidly declines, there are concerns that additional restrictions on jeonse loans for non-resident homeowners could accelerate this trend. The government aims to curb leveraged investments such as gap investments, but there are fears that further regulations could heighten instability in the rental market, which is already experiencing a decrease in supply.
According to industry sources, President Lee Jae-myung stated at a press conference the previous day that "jeonse is a form of private finance unique to South Korea" and that "the extensive provision of jeonse loans has been a primary cause of rising housing prices." He emphasized the need to prevent speculation using other people's money, indicating a strong commitment to blocking leveraged investments. His direct attribution of the jeonse loan issue to rising housing prices suggests that discussions on tightening regulations may gain momentum.
Financial authorities are also reviewing related regulations. The Financial Services Commission announced in April its plans to introduce loan restrictions for non-resident homeowners for speculative purposes as part of its "2026 Household Loan Management Plan." On May 21, Financial Services Commission Chairman Lee Ok-won mentioned the need to continue examining regulations on loans for non-resident homeowners, emphasizing the separation of real estate and finance. The authorities have also begun investigating jeonse loans secured by homeowners in regulated areas of the metropolitan area since late April.
Market analysts predict that the government’s tax reform plans could lead to stringent measures, such as applying the total debt service ratio (DSR) to jeonse loans. Currently, under the October 15 measures from last year, only the interest on loans for homeowners in regulated areas is subject to DSR calculations.
If jeonse loan regulations are tightened, it is expected to effectively block the inflow of financial resources into speculative demands like gap investments. According to a Financial Services Commission survey, the estimated amount of jeonse loans obtained by homeowners in regulated areas of the metropolitan area is approximately 9.2 trillion won, with around 59,000 cases recorded. The government believes that without blocking the structure of home purchases utilizing jeonse deposits, it will be challenging to enhance the effectiveness of loan regulations.
Lee Eun-hyung, a researcher at the Korea Construction Policy Institute, noted that "jeonse loans were originally introduced to support vulnerable groups during periods of low interest rates, but the scope and application have expanded excessively over time." He added that it is essential to consider how to address both supply expansion and demand suppression simultaneously.
The issue is that the jeonse market is already rapidly contracting. According to statistics from the Ministry of Land, Infrastructure and Transport, the proportion of monthly rent in new rental contracts for Seoul apartments reached 54.2% from January to May this year, up from 45.9% during the same period last year. This marks an increase of over 8 percentage points in the share of monthly rent in the new rental market for Seoul apartments within a year.
The decline in jeonse listings continues. As of today, real estate big data firm Asil reports that the number of jeonse listings for Seoul apartments stands at 18,574, down more than 26% from 25,240 a year ago. There are expectations that additional restrictions on jeonse loans for non-resident homeowners could further accelerate the shift to monthly rent.
The reduction in jeonse is also a result of changing choices among both landlords and tenants. With rising interest rates and concerns over deposit accidents, tenants find large jeonse deposits burdensome, while landlords prefer monthly rent or half-jeonse arrangements due to loan regulations and tax burdens.
The government and financial authorities already reduced the jeonse loan limit for homeowners to 200 million won through the September 7 measures last year. If additional regulations are implemented, while the demand for investment in homes with jeonse may decrease, there are concerns that this could simultaneously lead to a reduction in jeonse supply and an increase in monthly rent burdens.
Choi Kyung-ho, head of the Housing Neutrality Research Institute, stated, "Jeonse is a system based on the premise of leveraging investment returns, that is, price increases. If prices stabilize, it will naturally shrink. However, if it shrinks not because of stabilization but due to the aggressive push for a one-household, one-home policy, the burden on tenants will increase significantly." He further emphasized that to artificially reduce jeonse, a proactive approach is needed to transition to affordable monthly rent through supplier financing, alleviating housing cost burdens.
* This article has been translated by AI.
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