Seoul’s rental market is undergoing a structural shift as stricter tax policies penalize non-resident homeowners, driving a sharp decline in jeonse listings and a corresponding surge in monthly rent agreements.
The transition stems directly from the government’s real estate tax revisions, which lower the tax burden for primary homeowners living in their properties while increasing costs for owners of non-resident or multiple homes. Policymakers designed the framework to encourage landlords to sell vacant or rented properties, thereby increasing homeownership supply. However, property industry analysts warn that many landlords are opting to convert their traditional jeonse (lump-sum deposit) units into wolse configurations or move into the homes themselves, squeezing renters and pushing rental costs higher.
Stricter Tax Brackets Target Non-Resident Homeowners
Under the government’s comprehensive tax overhaul, the comprehensive real estate holding tax basic deduction for single-home, owner-occupied properties increases from 12억원 to 14억원. Conversely, single-home owners who do not reside in their properties face a reduced basic deduction of 9억원. For owners who do not live in any of their properties, the deduction effectively shrinks to 4억원.
Additional adjustments target multi-home owners and properties in designated adjustment zones, where the fair market value ratio is scheduled to rise to 70% by 2027 and 80% by 2028. Meanwhile, the long-term holding special deduction for capital gains tax is slated for a phased transformation into a long-term residency deduction starting in 2028. Under the new rules, the government will phase out holding-period deductions entirely by 2029, rewarding actual residency periods with up to an 80% deduction capped at 10억원.
Landlord Responses: Selling, Moving In, or Converting to Monthly Rent
Faced with escalating holding costs, property owners must choose between selling their assets, moving in directly, or passing expenses onto tenants through monthly rent hikes. When a landlord decides to sell, the outcome for the rental market depends heavily on the buyer’s intent. If an investor purchases the property and maintains the lease, rental supply remains stable. However, if a homebuyer purchases the property for personal residence, the unit immediately exits the rental pool.
Property analysts note that because property taxes are legally levied on landlords but economically influenced by market conditions, portions of the increased tax burden frequently transfer to tenants via higher rents. Monthly rent agreements offer landlords a steady cash flow to manage recurring expenses such as holding taxes, maintenance fees, and financing costs, accelerating the market’s pivot away from traditional jeonse contracts.
Balancing Tax Reform with Housing Supply Solutions
Real estate experts point out that relying solely on tax pressure is insufficient to stabilize housing and rental prices without adequate supply pipelines. To counter potential shortages, the government is simultaneously advancing metropolitan housing supply plans, including accelerating construction and presales in the third-generation new towns and utilizing idle public land plots in Seoul and Gyeonggi province.
Because housing supply projects require extensive lead times for authorization, construction, and completion, short-term rental market stabilization remains a complex challenge. Market observers emphasize that the ultimate stability of Seoul’s housing and rental sectors depends on how effectively tax-induced selling incentives are paired with sustainable, long-term supply expansions from both public and private sectors.
Worth a look