"Supply Shortage, Bigger Problem in the Year After Next" Gangnam 3 Districts, Less Than 5,000 Households

[Asia Economy Reporter Kim Yuri] Concerns are rising that the shortage of new apartment supply in Seoul, identified as the root cause of housing instability, will become more severe the year after next than next year. In 2022, the number of move-in units is expected to be only about 60% compared to next year, which itself is half of this year's volume, and a drought in new apartment move-ins is anticipated in the Gangnam area, which drives Seoul's housing prices. To break the vicious cycle of 'panic buying' and the 'jeonse crisis,' it is pointed out that not only should effective supply plans be expedited, but the 'one household, one home occupancy' drive should also adjust its pace.

According to Real Estate 114 on the 8th, the total number of apartments scheduled for move-in in Seoul in 2022 is 17,020 units. Compared to this year's planned volume of 50,289 units, this is only about one-third. The number of apartments scheduled for move-in in Seoul next year is also estimated at 27,334 units, about half of this year's level.

In particular, the sharp decline in supply in major Gangnam areas stands out. The number of move-in units scheduled in 2022 for the three Gangnam districts?Gangnam, Seocho, and Songpa?is only 4,776 units. Except for 3 complexes totaling 3,334 units moving in early that year in Geoyeo-dong, Songpa-gu, an outer area of Gangnam, the central Gangnam districts of Gangnam and Seocho have only 1,442 units scheduled for move-in. Most of the move-in complexes in Gangnam and Seocho in 2022 are small to medium-sized. Considering that the implementation of the two lease laws?the right to request contract renewal and the cap on jeonse/monthly rent?has sharply reduced jeonse supply even in large new apartments, industry experts predict that these volumes are insufficient to resolve the worsening jeonse shortage.

This forecast of move-in volumes differs from estimates by the Ministry of Land, Infrastructure and Transport, the responsible government agency. The Ministry states that the average number of apartment move-ins in Seoul over the next two years (2021?2022) will be about 39,000 units, approximately 5,000 units more than the average of the past 10 years. However, this figure includes all buildings classified as apartments under the Building Act, such as villas, defined as 'residential buildings with five or more floors,' so it does not represent the actual volume of new apartment supply to alleviate the shortage.

The industry expresses concerns that the complete ban on mortgage loans for apartments priced over 1.5 billion KRW, combined with the designation of key Gangnam areas such as Samsung, Daechi, and Cheongdam-dong in Gangnam-gu and Jamsil-dong in Songpa-gu as land transaction permission zones, makes it impossible to purchase homes for purposes other than actual residence, further worsening the jeonse and monthly rent markets. Moreover, if the jeonse crisis prolongs, soaring jeonse and monthly rent prices could push up sale prices, potentially stimulating the currently stabilizing sale prices in the Gangnam area.

Researcher Heo Yoon-kyung of the Korea Construction Industry Research Institute diagnosed, "The recent problem in the housing lease market is the 'instability of the apartment jeonse market,' so there are not many policy tools available. Since new supply has a time lag and considering the assets and income levels of apartment tenants, it is not easy to prepare direct policies." She added, "Considering the volume of apartment completions in Seoul until 2022, multifaceted efforts are needed, such as temporarily suspending the occupancy requirement for reconstruction, excluding new housing within five years of completion from rent caps, and promptly implementing effective existing supply plans like public redevelopment."

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