Government Considers Tighter Rules for Villa Charter Deposit Guarantees, Possibly Impacting Majority of Contracts
SEJONG = Yonhap News) Reporter Hong Kook-ki – the government is weighing stricter requirements for accessing charter deposit return guarantees (charter guarantees) for villas, a move that could substantially limit eligibility for current and prospective renters.
Analysis by real estate brokerage and analytics firm Zipthos of 24,191 national villa charter contracts from the fourth quarter of 2024 (October-December) reveals that 78.1% (18,889 contracts) would be ineligible under a proposed condition of 70% of the housing price.
Currently, charter guarantees are available when the deposit is within 90% of the residential area’s assessed value. However, considering that villa housing prices are typically recognized as 140% of the official disclosure price by the Housing City Guarantee Corporation (HUG) and the Korea Housing Finance Corporation (HF), the effective deposit limit is currently 126% (1.4 0.9) of the disclosure price. Strengthening the requirement to 70% would lower the deposit baseline to 98% (1.4 0.7) of the disclosure price.
Nationwide, contracts unable to meet the new standards would require an average deposit reduction of ₩3.533 billion. Specifically,Seoul deposits would need to decrease by ₩39.75 million, Gyeonggi by ₩33.33 million, and Incheon by ₩2.29 million.
This shift would place a financial burden on landlords, potentially requiring them to increase deposits themselves and return funds to existing tenants to facilitate new leases. The availability of charter guarantees is frequently enough a prerequisite for securing a new tenant.
The Ministry of land, Infrastructure and Transport first indicated a potential reduction in guarantee requirements, from 90% to 70-80% of the current house price, on January 28th, citing a desire to curb charter fraud and speculative “gap investment.” Housing fund head Chung stated in a call with Yonhap News, ”it is reasonable to lower [the requirements] step by step.”
Lee Jae-yoon, CEO of Jugos, noted that the villa charter market is still adjusting to the “126% rule” implemented in May 2023.
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