Landlord can’t afford to pay rent back
Tenants may abandon moving plans
Mr. Lee (54), the landlord of ‘Mok-dong New Town Complex 9’ in Yangcheon-gu, Seoul (exclusive area 71㎡), recently broke the bank deposit to return the deposit to the tenant. The charter price, which soared to 700 million won two years ago, has collapsed to 400 million won. Saying, “I will continue to live only when I return the difference,” he assessed the tenant and agreed to return only 70 million won. He said, “The contract was almost broken due to a downward transaction before and after negotiations with the tenant.”
It was found that one out of five apartment charter transactions in Seoul were contracted at a lower price than two years ago. The landlord cannot return all the deposit to the existing tenant with the deposit received from the new tenant, so the landlord suddenly has to raise a lump sum, and the ‘reverse jeonse crisis’ is spreading, in which it is difficult for the tenant to receive the deposit in time and move out.
The Dong-A Ilbo on the 25th analyzed 23,667 apartment charter transactions in Seoul between the Ministry of Land, Infrastructure and Transport’s actual transaction price disclosure system and the proptech company ‘Hogaeng Nono’ over the past three months. appeared to be This is a result of comparing the jeonse price reported from October 26 to this day of last year with the average jeonse price for the same period two years ago. By distinction, Gangseo-gu had the highest proportion of reverse jeonse transactions at 28.1%, followed by Gangdong and Yangcheon (27.2%), Gangbuk (27.1%), and Yeongdeungpo-gu (25.4%). Such reverse jeonse crisis is largely influenced by the recent sharp drop in jeonse prices. According to KB Real Estate, apartment jeonse prices in Seoul fell 5.45 percent last year, the largest drop since 1998 (-22.41 percent) right after the Asian financial crisis. Song In-ho, director of the Economic Information Center at the Korea Development Institute (KDI), said, “The demand for jeonse rentals is decreasing as the burden of jeonse loans is increasing due to high interest rates.” It will get worse,” he said.
Jeonse price 900 million → 600 million decline… 750,000 won per month to the tenant and renew the contract
Seoul apartment renting crisis
Landlords Renew Contracts with Tenants
As much as the jeonse was lowered, the ‘reverse monthly rent’ cycle
Tens of thousands of won remodeling
#1. Mr. Park, in his 40s, who owns a 1,000-unit complex in Gangdong-gu, Seoul (84 square meters of exclusive area), recently extended the contract with the existing tenant and decided to give the tenant 750,000 won per month. When the rental price, which was 900 million won in early 2021, recently fell to 600 million won, the tenant asked for the difference. Mr. Park, who had no way to suddenly raise 300 million won in cash, said that he would return only half of the money, but give the rest to the tenant as interest on the deposit. This is what is called ‘reverse monthly rent’.
#2. Mr. Kim, an office worker in his 40s, gave up trying to move into an apartment in Gaepo-dong, Gangnam-gu, Seoul, which he bought two years ago, in March this year. This is because they cannot find a tenant for an apartment in Gangseo-gu, Seoul, where they currently live on a chartered basis. I planned to get my deposit back and pay the balance for the Gaepo-dong apartment, but the current apartment deposit has dropped from 500 million won to 300 million won. The landlord insisted that he could not pay because he had no money. Mr. Kim said bitterly, “I had to file a lawsuit against the landlord to get the deposit back, but it was difficult to bear the burden.”
● 2 years ago, ‘A’ landlord, renewed contract with tenant ‘Eupso’
Due to the increase in the loan interest rate, tenants prefer monthly rent to jeonse, and as the number of jeonse properties increases and it becomes difficult to find tenants, the phenomenon of ‘reverse jeonse’, in which the jeonse price drops by hundreds of millions of won, is accelerating. Immediately after the introduction of the revised Lease Act, the jeonse price soared, and the jeonse market, which had suffered a jeonse crisis, was reorganized into a tenant advantage, and landlords are trying to renew contracts by paying interest on the existing tenants’ jeonse loans or even receiving loans for renewal contracts.
Mr. Choi (37), who owns 84㎡ dedicated to Segok Prugio in Gangnam-gu, Seoul, disposed of all his stocks at a loss in order to renew contracts with existing tenants. He bought a house two years ago with a deposit of 850 million won, but the jeonse price recently dropped to 650 million won. Fortunately, the tenant said, “I will renew the contract if you return 50 million won,” so I hurriedly prepared the money. He said, “I was lucky this time, but at this rate, I am already worried that I will have to pay at least 200 million won more in two years.”
● ‘Don’t drive in nails’ is also a taboo for serving tenants.
Some landlords start remodeling after failing to find tenants. Mr. Kim (63), the owner of an exclusive 39㎡ apartment in Songpa-gu, Seoul, who has been completed for 20 years, said, “I heard that you can’t find a tenant if you don’t remodel at an authorized brokerage agency.” At this point, I am going to spend tens of millions of won to renovate the house.”
Mr. Jang (41), a member of the exclusive 59㎡ association of 1,400 reconstructed apartments in Mapo-gu, Seoul, has been struggling to find a renter recently. This is because the rental price reached 800 million won before completion last year, but it fell to 650 million won after moving in. He eventually found a tenant with a deposit of 250 million won and monthly rent of 1.2 million won. Mr. Jang said, “I took out a loan of 100 million won because the balance was not enough,” and “the date of the move was also set to the tenant, and I couldn’t even put in a special contract to ‘don’t drive in nails’.” An official from a nearby licensed brokerage office said, “The tenants say they won’t sign a contract if the landlord seems a little bit strict.”
● Continued ‘reversal rent crisis’ due to high interest rate and move-in of large complexes
Experts believe that the reverse tax crisis will continue for the time being. Demand for jeonse is decreasing due to high interest rates, but it is expected that the supply of jeonse will increase as the landlord’s obligation to live in a new apartment continues, as well as the move-in to large buildings in major areas of Seoul.
According to Real Estate R114, a total of 6,213 units are set to move in next month in Seoul. It is almost twice as many as in February last year. In particular, in the Gangnam area of Seoul, 2,990 units of ‘Raemian One Bailey’ in Seocho-gu in August and 6,702 units of ‘DH First Tier I-Park’ in Gangnam-gu in November are scheduled to move in to about 13,000 units this year alone. In addition, the government has also decided to revise and abolish the housing law, which applies to houses with a ceiling on sale prices in the metropolitan area. This means that many new apartments can be rented out. Park Won-gap, senior real estate expert at KB Kookmin Bank, said, “If the jeonse turnover rate drops due to the intensification of the reverse jeonse crisis, even tenants who have to move or single-householders who want to change will suffer damage.”
| reverse charter |
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A charter with a lower charter deposit than the previous charter contract. Situations where the landlord is forced to find a tenant with a lower deposit. This includes cases where it is difficult to find tenants due to a decrease in jeonse demand or an oversupply of jeonse. |
Reporter Dongsoo Choi [email protected]
Reporter Song Jin-ho [email protected]
Reporter Jeong Soon-gu [email protected]
