One Month Since New Lease Law Implementation... "Jeonse Prices Rising Regardless of Old or New Buildings"

Myeongildong Samik Green 2nd Complex Jeonse Price Rises 245 Million KRW in One Month
Jamsildong Woosung Up 230 Million KRW, Geumhodong Byeoksan Up 220 Million KRW
However, Small Units Converted to Monthly Rent Show Jeonse Price Decline
"Jeonse Listings Scarce... Monthly Rent Conversion Accelerates, Rental Market Shows Mixed Trends"

[Image source=Yonhap News]

[Asia Economy Reporter Onyu Lim] One month after the implementation of the new Lease 3 Act, which includes the key provisions of the right to request contract renewal and the cap on rent increases, the jeonse (long-term lease) prices for apartments in Seoul have risen regardless of the building age or price range. However, there were cases in August where jeonse prices fell in some complexes and smaller units due to the pre-reflection of July’s jeonse price increases and the acceleration of conversion to monthly rent.

On the 7th, Zigbang analyzed and announced changes in the current Seoul rental market one month after the new lease law took effect. According to Zigbang, there were 8,827 jeonse transactions in July and 5,099 in August in Seoul. Among these, 1,596 cases where transactions occurred in the same complex and unit size in both months were used for the analysis.

Samik Green 2nd Complex in Myeongil-dong rises by 245 million KRW in one month... "Jeonse prices rise evenly in both old and new buildings"

The investigation showed that Seoul apartment jeonse prices rose evenly regardless of building age or price range.

In Gangdong-gu Myeongil-dong, the 107㎡ unit of Samik Green 2nd Complex was leased for 650 million KRW in July but contracted for 895 million KRW in August, an increase of about 245 million KRW in one month. In Songpa-gu Jamsil-dong, the 131㎡ unit of Woosung rose from 750 million KRW to 980 million KRW, an increase of about 230 million KRW. In Seongdong-gu Geumho-dong 1-ga, the 114㎡ unit of Byeoksan also traded at a price about 220 million KRW higher (630 million KRW → 850 million KRW).

A Zigbang official explained, "Short-term jeonse price increases have also appeared in new buildings such as Wirye 2nd I-Park and Geumcheon Lotte Castle Gold Park, and this trend is also seen in ultra-high-end apartments like Tower Palace and Apgujeong Hanyang."

Price increases regardless of region... "From Daechi-dong with excellent school districts to mid-to-low price dense Geumgwan-gu"

Especially, the rising trend is clear in Daechi-dong, which is highly preferred by tenants due to its excellent educational environment. The jeonse price of a 119㎡ unit in Daechi I-Park rose about 150 million KRW from 1.8 billion KRW in July to 1.95 billion KRW in August. The 110㎡ unit in Raemian Daechi Haiseuteon increased by about 100 million KRW. Woosung 1st and Eunma complexes saw a 50 million KRW increase for 85㎡ units.

Banpo-dong, which has many new apartments and is highly preferred by tenants, showed a similar trend. The 132㎡ unit in Banpo Xi rose 200 million KRW from 1.9 billion KRW in July to 2.1 billion KRW in August, and the 85㎡ unit in Acro River Park increased about 150 million KRW from 1.55 billion KRW to 1.7 billion KRW.

Jeonse prices also rose in Geumgwan-gu (Geumcheon, Gwanak, Guro), where mid-to-low priced apartments are concentrated, and in Nodogang (Nowon, Dobong, Gangbuk). In Gwanak-gu Bongcheon-dong, the 85㎡ unit of Gwanak Park Prugio traded at a maximum of 450 million KRW in July but reached up to 600 million KRW in August. In Nowon-gu Sanggye-dong, the 85㎡ unit of Beacon Dream Hill 3 was leased for 500 million KRW in August, up 150 million KRW from July.

The situation is similar in Mayongseong (Mapo, Yongsan, Seongdong), emerging as a new residential area in northern Seoul. The 85㎡ unit of Ultra World Cup in Jung-dong, Mapo-gu, was leased for 580 million KRW in August, about 130 million KRW higher than the July peak price.

Some small units saw price drops due to pre-reflection of July’s jeonse price increases

However, there were cases where jeonse prices fell for certain complexes or unit sizes. Tower Palace and Hanla Vivaldi in Dogok-dong saw jeonse price increases from July to August, but Dogok Rexle showed a decline. In Banpo-dong’s Acro River Park, despite the overall rising trend, small units under 60㎡ showed a downward trend. The 60㎡ unit’s jeonse price dropped from 1.4 billion KRW in July to 1.27 billion KRW in August based on the highest price.

A Zigbang official said, "In some complexes, monthly rent transactions centered on small units occurred, and there were cases where the August transaction price was lower than that of July. Due to uncertainties caused by the implementation of the Lease 3 Act, prices were traded at higher levels in July, and with new contracts in August, the jeonse transaction market showed mixed trends in July and August," he analyzed.

Zigbang: "Strengthened occupancy requirements and new lease law implementation reduce jeonse listings... but jeonse market will not disappear"

Zigbang views that the strengthened occupancy requirements for tax savings along with the new lease law have accelerated the decrease in jeonse listings. A Zigbang official explained, "The occupancy requirements for capital gains tax exemption and long-term holding special deductions have been strengthened, and a two-year occupancy requirement for securing reconstruction move-in rights is also planned. These factors have accelerated landlords’ occupancy, leading to a decrease in jeonse listings."

Zigbang expects that as jeonse listings decrease, the conversion to monthly rent, which has centered on small units, may spread to medium-sized units. A Zigbang official said, "With persistently low interest rates close to zero, landlords prefer monthly rent income over deposits. Once monthly rent conversion is established in small units, it is likely to expand to medium-sized units."

Nevertheless, Zigbang believes that while the jeonse market may shrink, it will not disappear. A Zigbang official predicted, "Whenever the jeonse market becomes unstable, the disappearance of the jeonse market becomes an issue, but considering the stability of residence and investors’ perspectives on the future value of real estate, the jeonse market will shrink but not disappear."

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