Seoul New Buildings Have 86% Jeonse-to-Price Ratio...Causing Overheating in Housing Subscription

[Asia Economy Reporter Yuri Kim] The jeonse-to-sale price ratio of apartments in Seoul that have been occupied for less than one year (newly built apartments) reached 86%, indicating that it is relatively easy to raise funds using jeonse. The recent overheating of the subscription market is evaluated to be influenced not only by the price difference occurring after the sale and the preference for newly built apartments but also by the ease of such fund-raising.

According to Zigbang on the 8th, the jeonse-to-sale price ratio of newly built apartments this year was 76.6% nationwide and 86.3% in Seoul. Compared to 2018, when it was 69.5% nationwide and 84.6% in Seoul, it increased by 7.1 percentage points and 1.7 percentage points, respectively. In Incheon and Gyeonggi, it rose from 70.6% in 2018 to 76.4%, an increase of 5.8 percentage points, while in provincial areas, it increased from 66.5% in 2018 to 73.3%, a rise of 6.8 percentage points. The jeonse-to-sale price ratio of newly built apartments in provincial areas showed a relatively larger increase.

This year, by sale price range, the jeonse-to-sale price ratio of newly built apartments nationwide was highest at 82.4% for those priced between 600 million and 900 million KRW. This was influenced by the high jeonse ratio of 90.7% in Incheon and Gyeonggi within this price range. In Seoul, the jeonse-to-sale price ratio for newly built apartments priced between 600 million and 900 million KRW was 81.6%, exceeding 80%.

In Seoul, the jeonse-to-sale price ratio for newly built apartments was highest at 90.0% for those priced under 400 million KRW, followed by 89.8% for 400 million to 600 million KRW, and 89.6% for those exceeding 1.5 billion KRW. The jeonse ratio was relatively high for apartments priced under 600 million KRW, and for those exceeding 1.5 billion KRW, jeonse transactions occurred in Gangnam and Seocho districts, pushing the ratio close to 90%.

Excluding provincial areas, the jeonse-to-sale price ratio of newly built apartments was higher than the jeonse-to-market price ratio of existing apartments nationwide, in Seoul, and in Incheon and Gyeonggi. Especially in Seoul, the jeonse-to-sale price ratio of newly built apartments was 29.6 percentage points higher than that of existing apartments. This suggests that newly built apartments in Seoul exhibit a stronger leverage effect through jeonse compared to existing apartments.

Ham Young-jin, head of Zigbang Big Data Lab, said, "Although interim payment loans are regulated like mortgage loans, the higher jeonse leverage effect compared to existing homes reduces the burden of fund-raising," adding, "It is also believed that the absence of a mandatory residence period, as the private land subscription price ceiling system has not yet been implemented, is playing a role."

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