"Jeonse is disappearing, but if lending keeps being squeezed, those without homes have no choice but to move to the outskirts."
A financial industry official expressed disappointment at President Lee Jae-myung's recent remark that the current jeonse shortage was "a process of normalization." While the shift from jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent) to monthly rent is a structural trend, the official said, the president failed to show sufficient consideration of how that change will affect young people and those without homes, and of the alternatives.
Jeonse is indeed shrinking fast. According to real estate platform Asil, Seoul apartment jeonse listings stood at 24,914 as of the 17th, down 22.2% from a year earlier. As jeonse disappears, the only remaining options are monthly rent and purchase. This is also the reason people in their 30s are actively turning to home buying. Among the funding plan reports submitted from January to April this year (82,857 cases), 38.3% came from those in their 30s, the highest share of any age group.
With the disappearance of jeonse accelerating, it is necessary to examine whether the current lending regulations are truly the best solution for housing stability. Financial authorities have rolled out measures to curb lending aimed at speculative demand, including restrictions on extending the maturity of mortgage loans for multi-home owners. But for the listings on the market to transfer to those without homes, their borrowing capacity must also be supported. The mortgage loan ceiling in the greater Seoul area is currently capped at 600 million won, and the loan-to-value (LTV) ratio is 40%. While there is preferential LTV treatment (70%) for first-time buyers and special provisions under policy loans, the prices of Seoul apartments, whose average sale price far exceeds 1 billion won, must also be taken into account.
The "June 27 measures" introduced last year mark their first year in effect. It is time to coolly assess the policy's merits and demerits. A hasty easing of lending regulations could fuel rising home prices and household debt, but the choice is not only between extreme regulation and easing. Targeted measures, such as easing the debt service ratio (DSR) for young people without homes, are entirely possible.
In Korean society, jeonse is not merely a leasing system. It has functioned as a housing ladder, allowing young people to save on housing costs, accumulate assets, and move toward owning their own home. The disappearance of jeonse could mean a narrowing of opportunities to build wealth, and this is by no means a light matter. If the end of jeonse is a foreseen future, then presenting alternatives for what comes after it is also the government's responsibility.
