The Yoon Suk-yeol government will loosen key housing rules that the current Moon Jae-in government introduced two years ago, because they had all backfired, turning the country into one of the world’s hottest property market, Yoon’s transition team said Monday.

“Our team was briefed by the Land Ministry and we’re clear on one thing: A rule change coming in stages,” said Won Il-hee, the team’s deputy spokesperson, referring to rules on “jeonse,” or a lump-sum returnable deposit tenants usually looking for a two-year stay pay landlords, who invest it and pocket returns.

The jeonse rules -- enacted in July 2020 when Moon’s ruling Democratic Party of Korea amended laws mainly to cap increases of jeonse deposits at 5 percent and to allow tenants to extend the two-year contracts -- are believed to have caused unprecedented housing shortages as supply was outpaced by demand.

In the last two years, the jeonse prices have jumped 23.8 percent, according to the Korea Economic Research Institute, which compared the data to a rise of less than 3 percent between 2016 and 2019. The think tank said Moon’s jeonse policy had been the main reason behind the hike.

But the rule change would take time, as Moon’s ruling party, which holds majority control of the 300-seat National Assembly, is expected to vote down Yoon’s proposal. And experts have warned against a dramatic shift in housing policy.

“We have to be careful not to upset the market and people in it. Another major change like this needs some time off before it takes effect,” said Park Won-gap, a senior real estate analyst at KB Kookmin Bank.

However, Choi Whang-soo, an adjunct professor of real estate studies at Konkuk University, said South Koreans are already immune to ever-shifting housing policies, so any change the Yoon government intends to bring about to the housing market many say needs less regulation would be generally well received.

“And I wouldn’t characterize everything Yoon’s team is doing as ‘deregulation,’ because what they are removing was never needed there in the first place,” Choi said, adding the Yoon government could ride on public anger to pressure the National Assembly to see to the change it is supporting.

Seo Jin-hyeong, president of the Korea Real Estate Society, said Yoon needs to rewrite the housing rules, but his government would benefit from taking some of them with it.
 
The exceptions are the ones that require landlords to report their jeonse transactions to authorities, according to Seo, who added the report could help the government craft a better housing policy.