Jeonse Prices Were Said to Stabilize Soon... Nationwide Real Estate Agencies Say "They Will Rise Further"

Kim Hyun-mi "Jeonse Prices to Stabilize in a Few Months"
But Jeonse Outlook Index at 143... Record High
Forecasts from Over 4,000 Nationwide Brokerage Offices
Jeonse Crisis, Empty Jeonse, and Various Side Effects

Minister of Land, Infrastructure and Transport Kim Hyun-mi is responding to questions from lawmakers at the full meeting of the National Assembly Land, Infrastructure and Transport Committee on the morning of the 31st of last month. (Photo by Yonhap News)

[Asia Economy Reporter Moon Jae-won] The Seoul apartment jeonse (long-term lease) market is struggling to regain stability. With a decrease in jeonse listings and a sharp rise in prices, concerns are growing not only about the jeonse shortage but also about the risk of 'empty-can jeonse' (gangtong jeonse).

While the government maintains the stance that the market will 'stabilize soon,' industry experts warn that the ripple effects of the jeonse scarcity could be significant.

According to the monthly KB Housing Market Trends report released by KB Real Estate Live On on the 27th, Seoul's jeonse prices rose by 1.59% this month, an increase from 1.07% in the previous month. Among housing types, apartments showed even more instability with a 2.09% increase.

KB Real Estate Live On explained, "Eunpyeong-gu (3.29%), Nowon-gu (2.66%), Songpa-gu (2.62%), Seongdong-gu (2.42%), and Gangseo-gu (2.19%) saw price increases, and no areas experienced declines," adding, "The upward trend has continued since the announcement of the Lease Protection Act."

The problem is that this sharp rise in jeonse prices is likely to continue for the time being. Seoul's jeonse price outlook index for this month recorded 143, far exceeding the baseline of 100.

This index is based on a survey of over 4,000 brokerage offices nationwide, measuring whether jeonse prices are expected to rise or fall, expressed on a scale from 0 to 200. A score above 100 indicates a higher likelihood of price increases.

The jeonse price outlook index fell from 118 in January to 105 in April but jumped to 130 in June and has been rising every month since.

Minister of Land, Infrastructure and Transport Kim Hyun-mi stated at the National Assembly Land, Infrastructure and Transport Committee plenary session on the 11th, "I believe jeonse prices will stabilize in a few months," but analysts point out that prices have already risen too much, causing significant hardship for ordinary citizens, and it is difficult to predict when market stabilization will occur.

In fact, in various parts of the metropolitan area, complexes where jeonse prices are approaching or exceeding sale prices are emerging, raising warnings of a potential 'empty-can jeonse' crisis.

According to the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system, a unit of 84.98㎡ (exclusive area) in Humansia Mulpure Village, Changdeok-dong, Giheung-gu, Yongin, Gyeonggi Province, was sold for 288 million KRW on July 1, but a jeonse contract was signed for 290 million KRW on June 26. The jeonse price is 2 million KRW higher than the sale price.

Similarly, a 14.5㎡ unit in Air Palace, Banghwa-dong, Gangseo-gu, Seoul, was sold for 108 million KRW on July 1, but a jeonse contract was signed for 110 million KRW on July 24. The jeonse price exceeds the sale price by 2 million KRW.

The government’s implementation of the rent ceiling system and the right to request contract renewal has sharply reduced jeonse listings, and increased demand from applicants waiting for the 3rd new town housing supply has driven jeonse prices up significantly.

As the gap between jeonse and sale prices narrows, some investors continue 'gap-free investment.' However, in cases of 'empty-can housing' where jeonse prices surpass sale prices, caution is necessary because if housing prices stabilize later, owners may not be able to return the jeonse deposit even if they sell the property.

Sale prices are stabilizing gradually amid cautious sentiment but still maintain an upward trend. According to KB Real Estate Live On, Seoul’s housing sale prices rose 1.42% month-on-month this month. Although the rate of increase has somewhat slowed, areas with many mid-to-low priced complexes such as Nowon-gu (3.07%), Eunpyeong-gu (2.94%), Seongdong-gu (2.64%), and Dobong-gu (1.79%) saw significant rises, with no areas experiencing declines.

KB Real Estate Live On explained, "The nationwide housing sale price increase has not expanded and showed a similar level of increase as last month," adding, "Since expectations for jeonse price increases remain, the stabilization of the jeonse market will require further observation."

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