A passerby walks past a real estate agency displaying rental listings in Seoul on June 23 as the city undergoes a sharp rise in housing prices. The uptick in prices has pushed the city’s average jeonse-to-price ratio to its lowest level in over eight years. According to real estate platform R114, the average jeonse ratio-the proportion of rental deposit to property sales price-for 1.57 million apartment units across Seoul's 25 districts fell to 45.2 percent in May, the lowest since January 2017. [YONHAP]

A passerby walks past a real estate agency displaying rental listings in Seoul on June 23 as the city undergoes a sharp rise in housing prices. The uptick in prices has pushed the city’s average jeonse-to-price ratio to its lowest level in over eight years. According to real estate platform R114, the average jeonse ratio-the proportion of rental deposit to property sales price-for 1.57 million apartment units across Seoul’s 25 districts fell to 45.2 percent in May, the lowest since January 2017. [YONHAP]

 
The Lee Jae Myung administration has unveiled the outline of its real estate policy through a series of measures aimed at suppressing demand. These include limiting mortgage loans to properties under 600 million won, banning loans for owners of multiple homes, restricting loans for jeonse (lump-sum deposit lease) and considering raising the official appraisal rate for property tax purposes. While these efforts have helped cool down surging housing prices, signs of instability are reemerging — this time in the rental market.
 
Recent increases in jeonse prices in the greater Seoul area suggest that anxiety remains. In Gwacheon, Gyeonggi, the average jeonse price for small to mid-size apartments (60–84 square meters) has reached 900 million won, over 100 million won more than two years ago. Similar trends are appearing in major districts of Seoul and Gyeonggi. The June 27 loan restrictions have led to a drop in jeonse listings, which may not only push rental prices higher but also accelerate the shift from jeonse to monthly rent.
 
According to the Korea Real Estate Board, Seoul’s average jeonse prices rose 0.24 percent in June compared to the previous month, up from 0.15 percent in May. In 24 of Seoul’s 25 districts, jeonse prices increased — only Seocho District, which saw a large volume of new housing supply in June, remained flat.
 
The government’s new lending rules have also blocked common investment strategies such as gap investing and loans conditional on ownership transfer, likely reducing available jeonse listings even further. As listings decline, prices rise. Higher rents may then feed into renewed upward pressure on housing prices overall. Adding to the concern, the Construction and Economy Research Institute of Korea projects that new apartment supply in the Seoul metropolitan area will fall from 140,000 units this year to 100,000 next year. With this supply drop, the government must act preemptively to prevent rental instability from becoming entrenched.
 
 
To its credit, the government has acknowledged the need for supply-side solutions. It is pursuing early development of third-phase new towns, expanding supply by relocating military facilities and easing floor-area ratio restrictions, and relaxing regulations on redevelopment and reconstruction projects. Still, many of these initiatives reiterate previous policies and lack clarity on critical elements such as location, volume, and timeline.
 
What is now urgently needed is a realistic and specific housing supply roadmap. Suppressing demand through loan and tax regulations can only go so far. Without an adequate supply, price instability — particularly in a low-interest-rate environment — may return. The Korean housing market has repeatedly shown that when home prices cool, jeonse prices often spike in response.
 
To avoid such distortion, the government must outline where, how much and when new housing will be supplied. Only then can real buyers make plans, and the current surge in rental prices be addressed. Relying solely on demand suppression will not succeed. Without a clear path forward, the administration risks reinforcing the perception that progressive governments lead to rising home prices. Now is the time to present a supply roadmap and restore public confidence.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.