Amid the accelerating shift from jeonse (lump-sum deposit lease) to monthly rent, experts have forecasted that the upward trend in monthly rent prices is unlikely to ease next year due to lingering interest rates and tax burdens.

On the 6th, during the "Zip-Ttang-Ji-Sung" program on the YouTube channel E-Today TV, Kim In-man, head of the Kim In-man Real Estate Economy Research Institute, and Yoon Ji-hae, a real estate commentator, analyzed the causes behind rising monthly rents and the outlook for the future lease market.

Director Kim noted, "The average monthly rent for apartments in Seoul has reportedly jumped by 15% over the past year, with 4 out of every 10 monthly rent contracts exceeding 1 million won."

In response, Commentator Yoon stated, "Instead of asking why rents are rising, we should rather ask what reason there is for them to drop," pointing to interest rates, inflation, and tax burdens as the primary drivers of rent hikes. He explained that when landlords face heavier mortgage interest burdens, those costs tend to be reflected in monthly rents. He also analyzed that increased costs stemming from taxes and inflation can similarly be passed on to tenants.

The conversion from jeonse to monthly rent was also pinpointed as a factor driving up prices. Yoon noted that because the jeonse-to-monthly-rent conversion rate—applied when converting a portion of the jeonse deposit into monthly rent—is set higher than market interest rates, it can aggravate the housing cost burden for tenants.

Yoon analyzed that the shift toward monthly rent in the metropolitan area and regional provinces stems from different causes.

In regional areas, he explained, stagnant or falling housing prices have diminished the incentive to maintain jeonse. Landlords, finding it difficult to expect capital gains from rising housing prices, prefer monthly rent, which provides regular monthly rental income.

Conversely, in the metropolitan area, government real estate regulations are accelerating the transition to monthly rent, he argued. Regulations such as stricter requirements for joining jeonse deposit return guarantee insurance and restrictions on loans for registered rental businesses are placing a burden on jeonse supply.

"In regional areas, the significance of jeonse has declined, whereas in the metropolitan area, the transition has been accelerated by government regulations," Yoon stated.

He also analyzed that changes are emerging in tenants' residential preferences. When jeonse loan interest rates are higher than or similar to monthly rent, tenants may choose monthly rent. Concerns over jeonse fraud and the demand to deploy large sums of capital into alternative assets such as stocks were also cited as factors driving the preference for monthly rent.

"We are heading toward an era of monthly rent; the only question is whether we will get there quickly or slowly," Yoon remarked, adding, "Right now, the pace has become extremely fast."

Furthermore, Yoon pointed out that housing prices have failed to stabilize despite demand-suppression policies such as government loan regulations and the designation of land transaction permission zones. Even when housing purchases for investment purposes are restricted, actual residential demand persists, he noted.

Since expanding housing supply takes time, he argued that demand should be dispersed toward the outskirts of the metropolitan area, regional provinces, and non-apartment markets such as villas and officetels. To achieve this, he proposed easing loan regulations or providing tax reductions for purchasing homes in suburban areas.

For homelless individuals, he advised deciding on a housing method by thoroughly comparing jeonse loan interest, monthly rent, and the principal and interest payments associated with purchasing a home.

[Copyright (c) Global Economic Times. All Rights Reserved.]