Last month, South Korea’s monthly rent inflation recorded its largest increase in nearly 13 years, rising 1.5% compared to the same month last year. Concurrently, lease price (Jeonse) inflation rose by 1.4%, and new Jeonse loan interest rates at commercial banks climbed to 4.57% per annum as of September, compounding the financial burden on tenants.
According to data released on the 15th by the Korea Statistics Portal (KOSIS) under the National Data Agency, the national consumer price index for monthly rent rose 1.5% year-over-year last month, marking the steepest increase since December 2013 (1.5%). The inflation rate for Jeonse (lump-sum housing deposits) stood at 1.4%, the highest since February 2023 (1.6%).
Combined Jeonse and monthly rent inflation rose 1.4% from a year ago, registering the largest jump in 3 years and 10 months since December 2022. The combined rental inflation rate has steadily climbed for four consecutive months, moving from 1.0% in June to 1.1% in July, 1.2% in August, 1.3% in September, and 1.4% in October.
The consumer price index for rental housing reflects both existing and newly renewed contracts. Because the rent for current tenants often remains unchanged until contract renewal—even when market prices for new contracts surge—broader market movements are reflected in the price index with a time lag.
Regionally, Ulsan recorded the highest combined rental inflation rate at 2.4%, followed by Seoul (2.1%) and Sejong (1.6%). These three regions were the only ones to exceed the national average. Ulsan has maintained the highest inflation rate nationwide for four consecutive months since hitting 2.0% in July. Seoul's rate rose from 1.7% in July to 2.0% in September, staying in the 2% range for two straight months, while Sejong saw its rate climb to 1.6% in October after lingering in the 0% range through June.
Tenants taking out new loans to secure housing deposits are also facing heightened interest burdens. According to Bank of Korea monetary and financial statistics, the average interest rate on newly issued Jeonse loans by deposit-taking banks rose 0.87 percentage points from 3.70% per annum in May of last year to 4.57% in September of this year.
Applying these average interest rates to a hypothetical principal of 100 million KRW, monthly interest payments increase from approximately 308,300 KRW to 380,800 KRW. Assuming the principal remains unchanged, this simple calculation represents an increase of 72,500 KRW per month, or roughly 870,000 KRW annually.
Furthermore, the average Jeonse deposit required by households has surged by over 56 million KRW over a six-year period. An analysis of microdata from the National Data Agency's Household Financial Welfare Survey showed that the average Jeonse deposit increased by 34.9% (56.35 million KRW), rising from 161.62 million KRW in 2019 to 217.97 million KRW last year. The figure has climbed every year during the survey period, surpassing the 200 million KRW threshold in 2023.
Over the same period, average household debt balances—including collateral and credit loans used to secure Jeonse deposits—jumped 53.0% from 30.33 million KRW to 46.39 million KRW. This growth rate outpaced the increase in deposits by 18.1 percentage points, pushing the average ratio of financial liabilities to deposits from 18.8% to 21.3%.
However, Jeonse deposits and financial liabilities have shown differing trends over the past two years. While average Jeonse deposits continued to rise, average household financial liabilities incurred for deposit acquisition decreased by 2.1% in 2024 and 1.0% last year, respectively.
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