New Lease Law 5 Months... "Seoul Jeonse Over 1 Billion Won Surges 30% Aftershock"

A Total of 5,814 Cases So Far, 1,313 More Than Last Year
Significant Increase in Jeonse Over 1 Billion KRW in Mayongseong Outside Gangnam 3 Districts
Sharp Rise in Small to Medium-Sized Jeonse Over 1 Billion KRW in Gangnam

Seoul apartment view from the 63 Building observatory / Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Lim On-yu] The aftershocks of the new Housing Lease Protection Act are intensifying. This year, the volume of apartment jeonse (long-term lease) transactions exceeding 1 billion KRW in Seoul has increased by nearly 30% compared to last year. In particular, Songpa-gu saw a surge of over 80%. This is the result of soaring jeonse prices due to a supply-demand imbalance caused by a shortage of jeonse listings. Although the government has detailed the November 19 supply measures, questions about their effectiveness remain, and the market’s outcry over the jeonse crisis appears to be growing louder.

On the 26th, Asia Economy analyzed the Ministry of Land, Infrastructure and Transport’s real transaction disclosure system and found that as of the 22nd, the number of jeonse transactions for apartments priced over 1 billion KRW in Seoul this year totaled 5,814. Despite more than a month remaining in the reporting deadline, this represents a 29% (1,313 transactions) increase compared to 4,501 transactions last year.

Jeonse transactions over 1 billion KRW were concentrated in the three Gangnam districts?Gangnam, Seocho, and Songpa?accounting for 82% of the total with 4,777 transactions. By district, there were ▲Gangnam-gu 2,160 ▲Seocho-gu 1,752 ▲Songpa-gu 865 transactions. The steepest increase was in Songpa-gu. Although Songpa-gu had relatively lower jeonse prices among the three Gangnam districts, the number of jeonse transactions over 1 billion KRW rose 81% from 478 last year to 865 this year. Especially in the Jamsil-dong area, known as the 'El, Ri, Te (Els, Residents, Tridgium)' complexes, high-priced jeonse transactions exceeding 1 billion KRW nearly tripled from 158 last year to 437 this year.

Notably, high-priced jeonse transactions have also sharply increased outside the Gangnam area, with a growing proportion of small- and medium-sized units. Indeed, districts such as ▲Yongsan-gu (169 → 247) ▲Yangcheon-gu (103 → 171) ▲Seongdong-gu (117 → 168) ▲Mapo-gu (100 → 148) showed clear increases in high-value jeonse transactions.

Jeonse transactions for small- and medium-sized apartments (exclusive area 85㎡ or less) priced over 1 billion KRW nearly doubled from 1,050 last year to 2,057 this year. Among these, small units (59㎡ or less) accounted for as many as 235 transactions. For example, a 49㎡ unit at The H Honor Hills in Gaepo-dong, Gangnam-gu signed a jeonse contract for 1 billion KRW last September. This apartment traded at an average of 690 million KRW in December last year, marking an increase of over 300 million KRW in nine months. Similarly, a 49㎡ unit at Cheongdam Xi in Cheongdam-dong, Gangnam-gu was traded for 1.2 billion KRW last October. This complex had an average transaction price of 780 million KRW in December last year, rising by more than 400 million KRW in ten months.

Seoul’s jeonse prices, which had been rising in the first half of this year, began to surge rapidly after the implementation of the new lease law in July, which includes the right to request contract renewal and caps on rent increases. This trend is intensifying. According to the Korea Real Estate Board, from the second week of November to the third week of December, Seoul apartment jeonse prices recorded a high growth rate of 0.14?0.15%.

Experts cite the direct causes of this sharp rise in jeonse prices as the implementation of the new lease law, including the right to request contract renewal and rent increase caps. Additionally, the non-taxation of capital gains for single-homeowners and stricter residency requirements for reconstruction association members are also identified as factors driving the shortage of jeonse listings and the resulting price surge. With a shortage of new housing supply expected next year, even experts cannot predict how long the jeonse price increase will continue. Ham Young-jin, head of the Zigbang Big Data Lab, said, "Due to the revision of the lease law, the number of jeonse contract renewals has increased, reducing available listings, while demand to remain as non-homeowners for apartment subscription is expected to continue for the time being, potentially worsening the supply-demand imbalance."

Contrary to the instability in the jeonse market, the government has offered a somewhat positive assessment. Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, stated at the 12th Real Estate Market Inspection Meeting held recently at the Government Seoul Office, "Although existing instability factors such as household and family increases persist in the jeonse market, the pace of price increases has somewhat slowed since December due to eased moving demand, and jeonse listings are accumulating." He also noted, "The integrated renewal rate for jeonse and monthly rent contracts in November was 70.3%, indicating a gradual increase in the proportion of tenants renewing contracts."

He further projected that with the inclusion of the November 19 supply plan (36,000 units), a total of 460,000 units will be supplied next year, stating, "If the plan is implemented without setbacks, the supply of move-in units will exceed the average level (457,000 units nationwide over the past 10 years), which will help stabilize the market."

However, questions about the effectiveness of government measures remain in the market. Yang Ji-young, director of R&C Research Institute, pointed out, "The government’s measures do not include plans to increase the supply of apartment jeonse units that people want, so it will be difficult to see effects. As jeonse prices continue to rise, a vicious cycle that stimulates apartment prices may occur."

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