Apartment Prices Falling, Jeonse Prices Rising... Changing Seoul Real Estate

Real Estate 114 Survey: Seoul Apartment Prices Down 0.01%
First Decline Since Early June Last Year
Korea Appraisal Board Reports 0% Change...Rise Slows
Jeonse Prices Rising...Supply Decreases, Demand Increases

On the 24th, a citizen is looking at a quick sale post in front of a real estate agent in Seocho-gu, Seoul. (Photo by Yonhap News)

[Asia Economy Reporter Moon Jiwon] Due to the economic downturn caused by the spread of the novel coronavirus infection (COVID-19), government regulations, and increased holding tax burdens, apartment prices in Seoul are stalling. According to private surveys, Seoul apartment prices have already turned downward, and public institution surveys show prices are stagnant. Analysts predict that a full-scale decline will begin soon.

Unlike the stagnation in housing prices, there are concerns that jeonse (long-term lease) prices could surge. In the Gangnam area, some complexes have seen jeonse deposits rise by tens of millions of won in recent months. Since homeowners are likely to reduce the amount of jeonse supply going forward, the jeonse market is expected to become unstable.

According to Real Estate 114, a private market information company, Seoul apartment sale prices fell by 0.01% this week compared to the previous week. This is the first time since the first week of June last year (-0.01%) that Seoul apartment prices have declined in this survey. General apartments rose by 0.01%, but redevelopment complexes dropped by 0.19%.

In the survey by the Korea Real Estate Board, a public institution under the Ministry of Land, Infrastructure and Transport, Seoul apartment prices stopped their upward trend that had continued since July last year. According to the "Weekly Apartment Price Trend for the 4th Week of March 2020," as of the 23rd, the Seoul apartment price increase rate remained at 0%, unchanged from the previous week. The decline was particularly significant in areas with concentrated regulations such as Gangnam (-0.14%), Seocho (-0.14%), and Songpa (-0.10%).

Among Seoul's autonomous districts, six districts?Jongno, Seongdong, Gwangjin, Seongbuk, Gangdong, and Jung?recorded a 0% increase rate. The previously relatively high price increases in Nowon, Dobong, and Gangbuk (known as No-Do-Gang) also showed signs of slowing. Except for No-Do-Gang and Geumcheon, Gwanak, and Guro (known as Geum-Gwan-Gu), most other districts saw price increases limited to 0.01?0.03%.

According to industry sources, complexes such as Eunma Apartments in Daechi-dong, Gangnam-gu, and Raemian Blestige in Gaepo-dong saw price drops ranging from a minimum of 5 million won to a maximum of 90 million won. In Songpa-gu, Jamsil-dong Jugong 5 Complex and Lake Palace also saw price decreases of tens of millions of won. The surge of urgent sale listings that had been concentrated in Gangnam is gradually spreading to other districts. The Yeouido Shibeom Apartments in Yeongdeungpo saw asking prices drop by about 70 million won compared to the end of last year, and the Mapo Raemian Prugio in Mapo-gu saw asking prices fall by 80 million won in just a few days recently.

[Image source=Yonhap News]

On the other hand, the jeonse market is showing signs of rapid price increases. According to the Korea Real Estate Board's survey, Seoul apartment jeonse prices have risen by 0.04% for six consecutive weeks since the 17th of last month. The increase rates were relatively high in Seocho (0.10%), Dongjak (0.08%), Gangnam (0.07%), Mapo (0.07%), Songpa (0.06%), and Gangseo (0.06%).

The Korea Real Estate Board analyzed, "In Seocho and Gangnam districts, jeonse prices rose mainly in redevelopment complexes with price merits or areas with relocation demand due to maintenance projects, while in Songpa and Gangdong districts, increases were concentrated in lower-priced outer complexes." Yangcheon-gu (-0.04%) was the only district in Seoul where jeonse prices fell.

The jeonse market is expected to continue unstable movements for the time being due to the contraction of the sales market, increased holding tax burdens from official price hikes, and interest rate cuts. In Banpo-dong, Seocho-gu, a jeonse contract for Banpo Xi 84.998㎡ was signed for 1.33 billion won in January but rose to 1.4 billion won last month. Currently, listings are up at 1.45 billion won.

With the recent increase in official prices, homeowners' holding tax burdens have grown, increasing the likelihood that existing jeonse units will be converted to monthly rent or half-jeonse to secure cash. Relocation from redevelopment complexes such as Cheongdam Samik Apartments (888 households) in Cheongdam-dong and Sinbanpo 4 District (3,000 households) in Seocho-gu is imminent, which is expected to further concentrate jeonse demand.

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