Will 'Panic Buying' Spread Again Amid the Jeonse Crisis... Uncertainty in the Sales Market Too

[Asia Economy Reporter Yuri Kim] The nationwide apartment price increase rate has soared to levels seen immediately after the June 17 real estate measures. As rising prices and a shortage of listings exacerbate the jeonse (long-term lease) crisis, tenants are turning their attention to purchasing mid- to low-priced homes. Additionally, demand avoiding regulations is pouring into non-regulated areas in the metropolitan area such as Gimpo and some local metropolitan cities like Busan, causing a sharp rise. There are concerns that if panic buying triggered by the jeonse crisis intensifies again, market turmoil could worsen.

According to the Korea Real Estate Board on the 6th, the nationwide weekly apartment price rose by 0.17% in the first week of November (as of the 2nd), increasing from 0.13% the previous week. This is the highest figure in over four months since the fourth week of June (0.22%), right after the June 17 measures were announced. In particular, apartment prices in Seoul, which had been quiet, also expanded their rate of increase. This week, prices rose by 0.02%, breaking the recent 10-week streak of 0.01% sideways movement. Buying is concentrated mainly in outer areas with many mid- to low-priced apartments rather than high-priced complexes in the Gangnam area of Seoul. Notably, Jungnang-gu rose by 0.08% this week, the largest increase in 2 years and 1 month since the first week of October 2018 (0.10%). Nowon-gu and Gangbuk-gu also raised their increase rates from 0.02% last week to 0.03% this week.

According to KB Real Estate Live On data, Seoul apartment sale prices rose by 0.33% this week, up from 0.30% last week. Generally, outer Seoul areas such as Eunpyeong-gu (0.72%), Dobong-gu (0.66%), Dongdaemun-gu (0.52%), Gwanak-gu (0.48%), and Guro-gu (0.45%) showed high rates of increase.

The metropolitan area also rose by 0.15%, increasing from 0.11% last week. In Gyeonggi Province, prices rose by 0.23%, the largest increase in over four months. Gimpo (1.94%), which has relatively good access to Seoul, saw weekly price increases approaching 2% due to demand for gap investment. Experts analyze that this rise is driven by demand shifting from Seoul jeonse to Gimpo purchases, gap investment tendencies targeting the relatively low prices in non-regulated areas, and expectations for the metropolitan area express railroad (GTX)-D line. Along with Gimpo, Paju (0.37%), another non-regulated area in the metropolitan region, also increased its rate of rise.

Outside the metropolitan area, apartment prices rose by 0.23% this week, marking the highest increase in 8 years and 4 months since the Korea Real Estate Board began compiling data. Busan rose from 0.30% last week to 0.37% this week, Daegu from 0.26% to 0.30%, and Daejeon from 0.24% to 0.41%. Sejong (0.25%), Chungnam (0.23%), and Jeonbuk (0.15%) also increased their rates compared to the previous week.

Industry insiders believe that as the jeonse crisis worsens due to the two lease laws?the right to request contract renewal and the rent ceiling system?demand turning to purchases may increase. There are concerns that rising jeonse prices will support the relatively stagnant sale prices, sustaining the sharp price increases. The concerns are even greater given the expected sharp decline in new apartment supply next year. According to Real Estate 114, the nationwide scheduled apartment move-in volume next year is 265,594 units, a 26.5% (95,726 units) decrease compared to this year's expected volume. In particular, Seoul has only 26,940 units, about half of this year's 48,758 units. Gyeonggi Province will also see a 22.1% decrease compared to this year.

Experts point out that while the government is monitoring non-regulated local areas where house prices show signs of instability, the side effects caused by regulations after abnormal price surges are also significant. Recently, the 'Jeonse 3+3 Law,' which extends tenants' residence periods up to six years, was proposed, but since the jeonse crisis was caused by new tenants, there are still strong voices that it could cause even greater confusion among market participants. Ham Young-jin, head of the Zigbang Big Data Lab, said, "The difficulties in the jeonse market will continue for the time being. As a result, demand turning to purchases, especially for mid- to low-priced apartments, will increase, which could act as a factor of market instability."

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