[One Week After the June 17 Measures] Daechi-dong Landlord Says "Vacate After Lease Ends"... 'School District Jeonse' Parents in Meltdown

Implementation of 'Land Transaction Permission Zone' in Gangnam on the 23rd
Sales reports surged due to last-minute demand, then inquiries dropped sharply

Reconstruction complexes facing overlapping occupancy regulations
Foresee major chaos in the Jeonse market

Experts say "Jeonse suppliers are multi-homeowners, so listings are bound to decrease"

[Asia Economy Reporter Lee Chun-hee] "Until the day before the implementation of the land transaction permit system on the 22nd, the phone lines were flooded with inquiries about sales. From the 23rd, they suddenly stopped." (Representative of Real Estate Agency A in Jamsil-dong, Songpa-gu, Seoul)

"Many homeowners said they would move in as soon as their jeonse (long-term lease) contracts ended. It seems the two-year actual residence requirement for reconstruction is a heavy burden." (Representative of Real Estate Agency C in Daechi-dong, Gangnam-gu)

Just a week after the government announced the June 17 real estate measures, the feared repercussions are becoming a reality. From the 23rd, in the areas of Daechi, Samseong, and Cheongdam-dong in Gangnam-gu and Jamsil-dong in Songpa-gu, which were designated as land transaction permit zones, a flood of real transaction reports showing record-high prices as a 'last ride' before the system's implementation began. Along with this, the jeonse market in the vicinity, especially in reconstruction complexes subject to actual residence regulations, is plunging into chaos. Critics point out that the government's aggressive real estate policies are causing side effects such as rising housing prices and instability in the jeonse market.

According to the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system on the 24th, from the announcement of the land transaction permit zones on the 17th until the day before the regulation took effect on the 22nd, record-high transactions poured in the areas of Daechi, Samseong, and Cheongdam-dong in Gangnam-gu and Jamsil-dong in Songpa-gu over six days.

On the 20th, a 121㎡ (exclusive area) unit in Dongbu Centreville, Daechi-dong, changed hands for 3.5 billion KRW. This is the highest price ever recorded for that size. It jumped 250 million KRW from 3.25 billion KRW in March. On the same day, a 145㎡ unit in the same complex was traded for 3.6 billion KRW. Prices have recovered to pre-COVID-19 levels.

Record-high transactions were confirmed in various permit zones, including Raemian 1st Complex 181㎡ in Samseong-dong at 2.8 billion KRW (17th), Central I-Park 84㎡ in Samseong-dong at 2.81 billion KRW (18th), Els 84㎡ in Jamsil-dong at 2.17 billion KRW (18th), and Raemian Daechi Highstern 110㎡ in Daechi-dong at 2.55 billion KRW (20th).

This fever was demand trying to catch the last ride before the regulation took effect, so the market is calming down for now after the implementation. A representative from Real Estate Agency A in Jamsil-dong said, "Until the day before the transaction permit was enforced, inquiries were pouring in like a flood, but from the 23rd, they suddenly stopped and no transactions are taking place," adding, "Interest is shifting to properties in Yeoksam-dong, which are not subject to the transaction permit system."

Eunma Apartment Complex, Daechi-dong, Gangnam-gu, Seoul [Image source=Yonhap News]

The jeonse market remains unstable. In areas like Daechi and Jamsil-dong, where school district demand is high, inquiries about jeonse or semi-jeonse are increasing. A representative from Real Estate Agency B in Jamsil-dong explained, "This regulated area was highly preferred for residence, but with sales becoming difficult and the requirement to provide reasons when buying a new home, the popularity of jeonse is rising even more."

Especially, reconstruction complexes in the area, which are subject to overlapping regulations including the land transaction permit zone and the two-year actual residence requirement for cooperative member allocation, are expected to face confusion. Reconstruction waiting complexes tend to have low jeonse price ratios due to aging housing but have strong surrounding infrastructure, resulting in high jeonse demand. In particular, Eunma Apartments in Daechi-dong are popular due to the 'school district jeonse' targeting children's education near the Daechi-dong academy district.

A representative from Real Estate Agency C in Daechi-dong said, "Unlike sales, jeonse contracts have fixed terms, so there is no immediate pressure to vacate or raise prices," but added, "There are quite a few homeowners who say they will move in as soon as their contracts end."

A representative from Real Estate Agency D in Daechi-dong also predicted, "Demand for children's education is already high, and since jeonse prices are affordable, it was a rare jeonse complex, but it will inevitably decrease further."

Experts are concerned that the year-long rising trend in jeonse prices will steepen due to the flood of regulations. The actual residence requirement for reconstruction is likely to lead to a supply contraction of jeonse housing, causing jeonse prices to rise. According to the Korea Real Estate Board, Seoul apartment jeonse prices have been rising for 51 consecutive weeks since July last year. Even when the sales market showed signs of stagnation due to the spread of COVID-19, the jeonse market maintained a steady upward trend.

Kim Hak-ryeol, head of the SmartTube Real Estate Research Institute, pointed out, "The government is continuing policies without considering the jeonse market at all. It is the multi-homeowners who supply housing to the jeonse market, but the forced actual residence requirement is reducing the number of listings."

The market expects the jeonse shortage to worsen as the supply of new apartments in Seoul is scheduled to decrease. According to Zigbang, the number of apartment move-ins (planned) in Seoul is expected to sharply decline every half-year. The number of move-ins in Seoul was 23,675 units in the first half of this year but will drop to 17,929 units in the second half, falling to the 10,000-unit range. It is expected to continue declining to 13,080 units in the first half of next year and 10,960 units in the second half.

Ham Young-jin, head of Zigbang Big Data Lab, said, "With the noticeable decrease in Seoul's move-in volume and low interest rates, more landlords are likely to convert jeonse contracts to monthly rent, reducing jeonse listings," adding, "On the other hand, demand from tenants is likely to increase, so jeonse prices may continue to rise for the time being."

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