The Jeonse Crisis Spreads to 'Mid-to-Large Office-tels' as Apartment Alternatives

Q3 85㎡+ Seoul Officetel Jeonse Prices Rise 0.46%
Figure Exceeds Seoul Average by 0.33%... "Popular Among Newlyweds Unable to Find Apartment Jeonse"

[Asia Economy Reporter Onyu Lim] Mr. A, who was living in a jeonse lease in an apartment in Gongdeok-dong, Mapo-gu, Seoul, recently decided to move to a nearby officetel. The landlord expressed an intention to move in personally, and although Mr. A looked for jeonse listings in nearby apartments, there were hardly any available units and prices had risen too much. The jeonse shortage in Seoul apartments, which intensified with the implementation of the 'Lease 2 Acts' including the right to request contract renewal and the rent ceiling system, is now spreading to medium- and large-sized officetels as the autumn moving season arrives.

According to the Korea Real Estate Board's officetel price trend survey on the 6th, the jeonse price increase rate for officetels in Seoul in the third quarter recorded 0.33%. This is more than double the 0.15% increase rate from the previous quarter. In particular, the jeonse price increase was significant for medium- and large-sized officetels that can accommodate 2-3 person families. The jeonse price increase rate for officetels exceeding 85㎡ (exclusive area) reached 0.46%, and for those between 60㎡ and 85㎡, it was 0.37%, both exceeding the average increase rate.

For example, a 98㎡ unit in Mapo Trapalace in Dohwa-dong, Mapo-gu, Seoul, was leased at a record high of 660 million KRW on the 10th of last month. Considering it was traded at 520 million KRW in October last year, the price rose by 140 million KRW in less than a year. This officetel's jeonse price had shown little change, maintaining around 500 million KRW in June 2018 and October last year, but recently surged due to the worsening jeonse shortage in nearby apartments. A representative from A Real Estate Agency in the area said, "Since jeonse in nearby apartments is so scarce, officetel jeonse prices are also rising accordingly," adding, "It is currently difficult to find medium- and large-sized officetel listings."

Similarly, the jeonse price of a 63㎡ unit in KCC Empire River, Hapjeong-dong, Mapo-gu, surged from 350 million KRW in February to 400 million KRW in September. In Yeongdeungpo-gu, a 95㎡ unit in Daewoo Ian, Mullae-dong, was traded at a record high of 438 million KRW on the 11th of last month.

The rise in medium- and large-sized officetel jeonse prices is analyzed to be due to substitute demand caused by the sharp increase in apartment jeonse prices and shortage of listings. The Korea Real Estate Board explained, "With the low interest rate trend and the implementation of the rent ceiling system, apartment jeonse prices have risen, leading some demand to shift to officetels, which also face a shortage in jeonse supply, causing their prices to increase."

Some experts point out that special caution is needed to protect deposits when signing jeonse contracts, as officetels with jeonse prices exceeding sale prices are increasingly appearing. Hyuntaek Cho, a researcher at the Commercial Information Research Institute, said, "In officetel-dense areas such as Gangnam, Gwanak, and Yeongdeungpo districts, it is not difficult to find cases where sale prices are lower than jeonse prices," adding, "Since officetels have lower liquidity compared to apartments, one should be careful of 'empty jeonse' cases where the deposit cannot be returned."

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