Seoul Jeonse Supply 'Halved'... Tenants in Gyeonggi-do Also Anxious

Seoul August Lease Contracts Down 47.6%
Record Low... Sharp Decline in Jeonse Supply Realized
Seoul Jeonse Crisis Spreads to Gyeonggi Province

[Asia Economy Reporters Inho Yoo, Mune Won] "There were originally few listings, but now there are none at all. Some tenants are even willing to pay monthly rents well over one million won due to urgency." (A representative from a real estate agency in Daechi-dong, Gangnam-gu, Seoul)

Although the revised Housing Lease Protection Act was implemented on the 31st of last month and a month has passed, market confusion is rather expanding. The jeonse (key money deposit lease) crisis that started in Seoul is spreading to Gyeonggi Province. Due to the 'Lease 2 Laws'?the Jeonse and Monthly Rent Cap System and the Contract Renewal Request System?the number of rental listings in the market has sharply decreased, and with the ongoing conversion from jeonse to monthly rent, tenants are experiencing increased housing insecurity.

Seoul: New Jeonse Listings Halved... Rapid Increase in Half-Jeonse

One month after the implementation of the Lease 2 Laws, the number of jeonse and monthly rent transactions in Seoul has halved. According to the Seoul Real Estate Information Plaza, 6,078 apartment lease contracts were signed from the beginning of this month until the 30th. Compared to last month's transaction volume of 11,600, this is a 47.6% decrease. This is the lowest monthly transaction volume on record.

The market diagnosis is that the rapid decrease in new rental listings available is due to the surge in contract renewal requests from existing tenants following the implementation of the Lease 2 Laws.

As listings become scarce, prices are also rising. According to KB Kookmin Bank's August Monthly Housing Price Trend, the average jeonse price for apartments in Seoul reached 510.11 million won, surpassing 500 million won for the first time ever. Additionally, with the continued conversion from jeonse to monthly rent, the proportion of half-jeonse (deposit plus monthly rent) transactions among apartment leases increased to 14.3% (868 cases). This is a 4.2 percentage point increase compared to last month (10.1%) and a 4.4 percentage point increase compared to June.

For example, a 97.35㎡ (exclusive area) apartment in Samsung Apartments, Daechi-dong, Gangnam-gu, was leased on the 13th of last month with a deposit of 750 million won and monthly rent of 1.3 million won, but on the 4th of this month, the deposit rose to 850 million won with monthly rent increasing to 1.4 million won. In Jamsil-dong, Songpa-gu, the monthly rent for an 84.8㎡ apartment at Els, with a 600 million won deposit, was 900,000 won at the end of last month but surged to 1.4 million won on the 20th of this month.

Jeonse Crisis Spreads to Gyeonggi Province

The jeonse crisis in Seoul is spreading to Gyeonggi Province. According to a KB Real Estate Live On survey, the Jeonse Price Outlook Index for Gyeonggi Province recorded 132.9 this month, the highest since the statistics began in January 2016. This index is calculated within a range of 0 to 200, and a value above 100 indicates a high likelihood of jeonse price increases in the future. Gyeonggi Province ranked third nationwide after Seoul (140.2) and Sejong (151.8) in terms of the index.

Some areas located on the border of Seoul have also seen a sharp decrease in listings. According to statistics from Asil (Apartment Real Transaction Price), a real estate big data company, jeonse listings in Bundang-gu, Seongnam-si, decreased by 86.6% in the month following the implementation of the Lease Act on the 31st of last month, marking the largest decline nationwide. Listings also dropped nearly 70% in Gwangmyeong-si (-69.5%), Ilsanseo-gu, Goyang-si (-65.3%), and Guri-si (-64.5%).

An 84.8㎡ apartment at Gwangmyeong Station Summit Place in Iljik-dong, Gwangmyeong-si, was leased on the 7th with a deposit of 550 million won, which is 100 million won higher than just before the implementation of the Lease 2 Laws. In Dongsak-dong, Pyeongtaek-si, the jeonse price for a 72.6㎡ unit in Pyeongtaek Central Xi 1 Complex rose from 170 million won earlier this year to 230 million won this month, increasing by 60 million won, showing instability in the jeonse market even in the outskirts of the metropolitan area.

Lee Eun-hyung, a senior researcher at the Korea Construction Policy Institute, said, "From next year, a significant portion of the supply will be subject to the Jeonse and Monthly Rent Cap System, so some forced stabilization seems possible," but added, "Since the number of listings in the lease market is expected to noticeably decrease, the jeonse crisis is inevitable."

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