Recent data shows that while the number of rental listings for apartments in Seoul has increased by nearly 30% over the past three months, the availability of jeonse (long-term lease) listings has decreased by more than 20% compared to two years ago. Although the overall rental market is recovering, there is a clear trend toward a reduction in jeonse and an increase in the proportion of monthly rent.
According to real estate big data platform Asil, as of August 4, there were 38,356 rental listings for Seoul apartments, up 28.9% from 29,754 listings on April 21.
However, the composition of these listings has changed. Jeonse listings accounted for 20,803 units, or 54.2%, while monthly rent listings made up 17,553 units, or 45.8%. Compared to the same time in 2024, when there were 26,599 jeonse listings, this represents a 21.8% decrease. Last year, jeonse listings were also low at 22,865 units, continuing the downward trend.
In contrast, monthly rent listings have increased by 20.7% from 14,547 in 2024 to 17,553 this year. The proportion of monthly rent in the total rental listings has risen from 35.4% to 45.8% during the same period. Despite the recent increase in rental listings, it is difficult to view this as a recovery in jeonse supply.
Amid the shortage of jeonse supply, prices are continuing to rise. According to KB Real Estate, the jeonse price for Seoul apartments increased by 1.34% in July compared to the previous month. Although this is a slight decrease from the 1.43% increase in June, prices continue to rise in areas with high demand. The jeonse supply-demand index for Seoul apartments stands at 126.2, exceeding the transaction demand index of 112.6, indicating that demand for jeonse is greater than supply.
The current decrease in jeonse listings cannot be solely attributed to recent tax reforms. It is more closely related to a combination of reduced housing supply, a slowdown in gap investment, structural changes in the rental market following jeonse fraud incidents, and landlords' preference for monthly rent. However, concerns have been raised that the government's 2026 tax reform plan, which aims to increase benefits for actual residents while raising the tax burden on non-residential and rental properties, could accelerate the shift toward monthly rent.
The reform plan expands the basic deduction for comprehensive real estate tax for one-homeowners living in their properties from 1.2 billion won to 1.4 billion won, while reducing the deduction for one-homeowners not residing in their properties to 900 million won. For multiple homeowners, only 400 million won of the 900 million won basic deduction will be uniformly applied, with the remaining 500 million won subject to the proportion of the actual residence in the total value of all properties. If a homeowner does not reside in any of their properties, the basic deduction will be reduced to 400 million won.
The fair market value ratio for homeowners with three or more properties and those owning properties in designated adjustment areas will gradually increase from the current 60% to 70% in 2027 and 80% in 2028. One-homeowners are exempt from this increase. The long-term holding special deduction for capital gains tax will be restructured into a long-term residence income deduction based on the duration of residence, with limits of 2 billion won in 2028 and 1 billion won starting in 2029.
The government expects that by enhancing benefits for actual residents and providing a grace period for multiple homeowners regarding capital gains tax, rental properties will enter the sales market. However, it is not guaranteed that homeowners will choose to sell. If the tax burden increases while properties remain unoccupied, homeowners may either sell or move in, and if they continue to hold, they may pass the increased costs onto rent.
If homeowners move in, those properties will exit the jeonse market. However, the overall impact on jeonse supply will depend on whether existing residences are reintroduced to the rental market. As the burden of property taxes increases, landlords may prefer monthly rent over jeonse to secure cash flow. Nam Hyuk-woo, a researcher at Woori Bank, noted, “There may be an increase in landlords seeking to charge monthly rent for new contracts after the expiration of existing contracts.”
Even if sales increase, it does not necessarily have a positive impact on the rental market. If rental properties are purchased by actual home seekers, those properties will exit the rental market. If lending regulations restrict tenants from transitioning to buyers, a situation may arise where rental demand remains while supply decreases.
Park Hoon, a professor of taxation at the University of Seoul, explained, “The market operates in conjunction with not only tax policies but also supply, interest rates, lending regulations, and economic conditions.” Even if tax incentives for sales are increased, if financial conditions for tenants to transition to buyers and alternative rental housing supply are not established, instability in the rental market may persist.
Reductions in benefits related to registered rental housing are also a variable. The government plans to gradually abolish the exemption from capital gains tax and the preferential treatment for long-term holding special deductions applicable to short- and long-term registered rental apartments in designated adjustment areas. Current benefits will be maintained until the end of 2027, then reduced in 2028, and eliminated starting in 2029.
Since the application is limited to certain registered rental apartments in designated adjustment areas, the overall impact on the rental market should not be overstated. However, if the taxation on non-residential properties is strengthened and the benefits for registered rentals are reduced, it could lower the incentive for private landlords to hold properties long-term and increase the motivation to recover increased costs through monthly rent.
Ultimately, there is a call for measures that not only encourage the sale of existing rental properties but also establish pathways for the supply of private and public rental housing to absorb the increasing rental demand. If new supply is insufficient, even if the number of properties for sale increases, the imbalance in the rental market could worsen.
Seo Jin-hyung, a professor of real estate law at Kwangwoon University, stated, “Someone must be able to purchase a property to rent it out for the rental supply to occur,” adding, “It is difficult to expect an increase in supply without addressing the demand and business viability for rental housing.”
The government’s tax reform plan also includes raising the limit on the amount eligible for monthly rent tax deductions from 10 million won to 12 million won annually, and applying a 17% deduction rate for young people regardless of total income for three years starting in 2027. A young person paying 1 million won in monthly rent with an annual income of 50 million won would see their deduction increase from 1.7 million won to 2.04 million won.
However, the monthly rent tax deduction is a system that reimburses a portion of already paid rent after the fact. It cannot be viewed as a supply measure to prevent the decrease in jeonse listings or the transition to monthly rent. The deduction is also limited to non-homeowning workers and diligent business owners, which may leave some tenants without benefits depending on their income or contract conditions.
Lee Chang-moo, a professor of urban engineering at Hanyang University, expressed disappointment that “fundamental measures to address instability in the rental market have not been presented,” warning that if the costs and profitability for private landlords deteriorate, it could lead to a decrease in rental housing supply or an increase in burdens passed on to tenants through rent.
* This article has been translated by AI.
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