As rent prices for apartments in Seoul continue to rise, the increase in jeonse loan rates is adding to the financial burden for tenants. With fewer jeonse listings available compared to a year ago, those renewing contracts or moving are facing challenges in finding suitable housing.
According to financial sources on November 10, the average interest rate for new jeonse loans from five major banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—was 4.47% in September, up 0.15 percentage points from the previous month. This marks a 0.73 percentage point increase from 3.74% in September of last year.
The interest burden varies significantly based on the applicable rate. For a jeonse loan of 400 million won at an annual rate of 3.74%, the yearly interest would be 14.96 million won. However, at the current rate of 4.47%, the annual interest rises to 17.88 million won, resulting in a difference of 2.92 million won per year, or about 240,000 won per month. This comparison uses the average new loan rates from both periods.
With rising rent prices, the amount needed for jeonse deposits is also increasing. According to KB Real Estate, the average jeonse price for apartments in Seoul last month was 728.98 million won, a 10.9% increase compared to the same month last year. The average jeonse price in the 14 districts of northern Seoul also surpassed 600 million won for the first time, reaching 608.1 million won, indicating a growing deposit burden even in areas where prices were previously lower.
Tenants who need to secure additional deposits during contract renewals or moves are facing the dual challenge of rising loan rates and increased loan amounts. As interest payments grow, those who rely on loans to cover shortfalls in deposits will see their monthly payments increase.
Options for finding affordable jeonse homes are dwindling. According to real estate big data firm Asil, as of today, there are 21,721 jeonse listings for apartments in Seoul, down 16.7% from 26,069 listings a year ago. With rising prices and fewer available properties, tenants are struggling to meet their requirements for deposits, location, and living space.
Jeonse transactions have also declined. The Ministry of Land, Infrastructure and Transport reported that the total number of jeonse transactions in Seoul in September was 17,154, a 28.2% decrease from the same month last year.
Amid these trends, the proportion of monthly rent in the apartment rental market is increasing. As of September this year, the share of monthly rent transactions in Seoul reached 52.7%, up 8.3 percentage points from the same period last year. With tenants opting for monthly rent or half-monthly contracts to lower deposits, the calculation of housing costs has become more complex, as they must now consider both loan interest and monthly rent.
A financial industry official stated, “The trend of decreasing jeonse listings is evident due to government loan regulations and changes in the housing market focused on actual residence. In a situation where purchasing a home is also challenging, those unable to secure jeonse are inevitably moving to monthly rent.”
* This article has been translated by AI.
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