Seoul Transaction Volume Hits Bottom... "Suburban Purchases Triggered by Jeonse Crisis"

[Asia Economy Reporter Kim Yuri] The "Lease 2 Laws," including the right to request contract renewal and the rent ceiling system for jeonse and monthly rent, have triggered a jeonse crisis, resulting in a "balloon effect" of increased apartment sales transactions. It is analyzed that many tenants, unable to afford soaring jeonse prices, are turning to purchases, leading to increased transactions of mid- to low-priced apartments in the outskirts of Seoul and the Gyeonggi Province area.

According to the Seoul Real Estate Information Plaza on the 17th, the number of apartment transactions in Seoul last month was 3,617 as of the current tally, similar to the 3,770 transactions recorded in September. Considering the 30-day reporting deadline for transactions, the final number for October is expected to significantly exceed the September statistics. This year, Seoul apartment transactions peaked at 15,616 in June and 10,646 in July but sharply declined to 4,988 in August and 3,770 in September due to the government's stringent loan and tax regulations, which drastically suppressed buying demand.

The recovery in transaction volume last month, after a decline, appears to be because many tenants, feeling residential insecurity due to the soaring jeonse prices following the implementation of the Lease 2 Laws, started purchasing relatively affordable apartments in the outskirts.

In fact, in some autonomous districts, October transaction volumes have already surpassed those of September, even though the tally is not yet complete. Notably, most of these are in the outskirts of Seoul, where mid- to low-priced apartments are concentrated. Jongno-gu saw the largest increase, doubling from 34 to 68 transactions, Gangbuk-gu rose 39.74% from 78 to 109, and Dobong-gu increased 30.71% from 140 to 183, already exceeding a 30% growth rate. Other districts such as Jungnang-gu (22.33%), Yeongdeungpo-gu (14.47%), Jung-gu (13.72%), Nowon-gu (9.61%), Eunpyeong-gu (6.71%), Seongbuk-gu (1.41%), and Yongsan-gu (0.99%) have also surpassed the previous month's transaction volumes. According to the Korea Research Institute for Human Settlements' Real Estate Market Research Center's "October Real Estate Market Consumer Sentiment Survey," the consumer sentiment index for Seoul's housing sales market rose 1.9 points from 129.5 in the previous month to 131.4 last month.

In Gyeonggi Province, the number of apartment transactions in October already exceeded those in September. According to the Gyeonggi Real Estate Portal, apartment transactions in Gyeonggi Province last month totaled 16,248, a 19.24% increase compared to 13,626 in September. The most notable increase was in Gimpo City, a non-regulated area in the metropolitan area, where apartment sales reached 2,347 in October, a 60.42% surge from 1,463 in September. This area remained a non-regulated zone along with Paju under the June 17 measures, attracting demand from non-homeowners and gap investors shifting from jeonse to purchase recently.

Other areas in Gyeonggi Province with over 1,000 transactions last month included Yongin City (1,364), Goyang City (1,318), Suwon City (1,262), Hwaseong City (1,086), and Paju City (1,030), all showing increased transaction volumes compared to the previous month. These areas are either conveniently accessible or adjacent to Seoul.

Experts believe that the various regulatory policies introduced by the government to stabilize housing have intertwined to distort the market. As jeonse listings sharply decreased due to the implementation of the rent ceiling and contract renewal rights, new jeonse demand shifted to purchasing mid- to low-priced apartments in the outskirts of Seoul and Gyeonggi, causing house prices in some areas to rise again. Additionally, tightening loan regulations, such as restrictions on mortgage loans by housing price and credit loan limits when purchasing homes, have increased anxiety among real buyers, drawing attention back to these properties. Ham Young-jin, head of Zigbang Big Data Lab, said, "Since this market centers on non-homeowner real demand, explosive growth in transaction volume is unlikely, but prices are also unlikely to fall easily. Even if properties come onto the market due to holding tax burdens, they will likely be limited to owners with three or more homes, so the adjustment of mid- to low-priced supply will continue for the time being."

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