Rising Jeonse Price Ratio... Gap Investment on the Rise

Seoul Apartment Jeonse Price Ratio in Q1
Up 3%p from Previous Quarter to 59.9%

Seoul Nowon, Dobong, Gangbuk Districts
Focus on Under 900 Million KRW with Less Loan Regulation
Gap Investment Inquiries Significantly Increase
Nowon Records Highest with 75 Transactions in 3 Months

[Asia Economy Reporter Donghyun Choi] "Because it is the spring moving season, there are places where the jeonse price has risen by more than 50 million won in just one month, and inquiries about gap investment have also increased significantly." (Representative of A Real Estate Agency in Junggye-dong, Nowon-gu)

Recently, as the jeonse-to-sale price ratio (the ratio of jeonse price to sale price) of Seoul apartments has entered a recovery phase, so-called 'gap investment,' which involves purchasing a house with jeonse and gaining capital gains, is making a comeback. In particular, demand is surging mainly for apartments priced under 900 million won, where loan regulations are less strict, in areas such as Nowon, Dobong, and Gangbuk districts (commonly called Nodo-gang).

According to frontline real estate brokerage industry sources on the 10th, inquiries about gap investment have significantly increased in apartments around Nowon-gu and Seongbuk-gu, which were once considered 'holy grounds' among gap investors. A representative of B Real Estate Agency in Sanggye-dong, Nowon-gu, said, "Recently, we tried to list a low-floor unit of 47㎡ (exclusive area) in Sanggye Jugong Complex 10 for 400 million won but raised the price to 430 million won, and there is someone willing to buy it even at 450 million won." He added, "When units with tenants come out around 500 million won, they tend to be sold quickly." A representative of C Real Estate Agency in Gireum-dong, Seongbuk-gu, also explained, "Recently, there have been many inquiries about apartments priced between 600 million and 900 million won in the Gireum New Town area," adding, "Due to loan regulations freezing funds, it seems that properties with tenants are preferred."

According to Asil (Apartment Real Transaction Price), a real estate transaction platform, Nowon-gu ranked first in the increase of gap investment sales transactions in Seoul over the past three months, with 75 out of 1,126 transactions (6.6%) being gap investment deals. Asil defines gap investment as apartments that are not occupied by the buyer after purchase but rented out for jeonse or monthly rent and compiles statistics accordingly. Following Nowon-gu were Dobong-gu (27 cases), Gwanak-gu (26 cases), and Seongbuk-gu (26 cases) in terms of the number of gap investment transactions. When the period is extended to six months, Nowon-gu (496 cases) remains first, but second, third, and fourth places are Songpa-gu (296 cases), Gangseo-gu (242 cases), and Gangnam-gu (214 cases), respectively. The recent shift in rankings from Gangnam areas to non-Gangnam areas is attributed to the December 16 real estate measures last year, which reduced the loan-to-value ratio (LTV) to 20% for housing mortgage loans exceeding 900 million won and completely banned housing mortgage loans for apartments exceeding 1.5 billion won. Looking at the gap investment rankings by apartment complex, Sanggye Jugong Complex 10 in Sanggye-dong, Nowon-gu, had the highest number with 28 cases in the past three months, followed by Gwanak Woosung in Bongcheon-dong, Gwanak-gu (17 cases), Geonyeong 3rd Complex in Junggye-dong, Nowon-gu (15 cases), and Wolgye Jugong Complex 2 in Wolgye-dong, Nowon-gu (14 cases).

Recently, the real estate market trend is also shifting to conditions favorable for gap investment. The jeonse-to-sale price ratio, which is the basis for gap investment decisions, has been rising recently due to the decline in sale prices of high-priced apartments. According to analysis of actual transaction prices by Zigbang using Ministry of Land, Infrastructure and Transport data, the jeonse-to-sale price ratio for Seoul apartments in the first quarter of this year was 59.9%, up 3 percentage points from 56.9% in the fourth quarter of last year. This is because while sale prices have stalled due to government measures, jeonse prices have shown a steady upward trend. According to the Korea Real Estate Board, since the December 16 real estate measures until the 2nd of this month, Seoul apartment jeonse prices have risen by 1.11%, supported by stable demand during the spring moving season. Ham Young-jin, head of Zigbang Big Data Lab, said, "While buying demand has slowed for high-priced and newly built apartments due to loan regulations, transactions have occurred in relatively affordable older apartments, causing the jeonse-to-sale price ratio to rise," and predicted, "The rise in the jeonse-to-sale price ratio will continue for the time being due to downward adjustments in sale prices."

This content was produced with the assistance of AI translation services.