Apartments rented on jeonse, or long-term deposit, contracts continue to become more expensive. Jeonse prices have increased for the 102nd week in a row. The trend continued from the first week of July 2019 to the first week of this month. Unless the Moon Jae-in administration changes its real estate policies, the trend will not change. If the liberal administration insists on increasing the appraised value of apartments, raising property taxes and controlling demand instead of increasing supply, a jeonse crisis is inevitable.
Unfortunately, the burden falls directly on low-income people and the younger generation despite the government’s promise to stabilize the housing market. Instead of dreaming of owning a home, these vulnerable classes struggle to find Jeonse contracts they can afford. Worse, the surge in jeonse prices could trigger a new surge in apartment selling prices across the country.
Everyone knows the reason for the real estate fiasco. The government was determined to regulate the redevelopment of buildings and complexes through a series of anti-market policies. A shortage of apartment supplies is only fueling price increases.
On top of that, the government continued to increase taxes such as transaction tax, land ownership tax, and comprehensive property tax for the rich. The government pressured homeowners to sell additional apartments, but even owners of single-family homes could not avoid shocks due to the rapid increase in the appraised value of their apartments. As a result, many homeowners have to pay property taxes up to 30 percent higher.
Owners of single-family homes can hardly move elsewhere due to the higher transaction taxes. Several owners have chosen to give their additional homes to their children or not to sell them. Jeonse’s 102-week price hike is the result of a policy failure. Due to low interest rates, house prices are bound to rise. But the government’s anti-market measures have contributed to the rise in house prices.
In a speech marking his fourth year in office last month, President Moon Jae-in admitted his administration’s mistakes. Yet the government is still sitting on its hands. He has ignored public pain for the past two years. Is the government really ignorant of the change of course needed now? We urge him to immediately end his dangerous political experiment. Otherwise, the jeonse crisis will get even more out of control.