"Effect of Abolishing 2-Year Actual Residence Requirement for Reconstruction"…Seoul Jeonse Rents Increase 11% in Two Months

Increase in Jeonse Listings as Owner-Occupiers Put Homes Back on Market
However, Fall Seoul Move-In Volume Lower Than Last Year, Raising Concerns Over Jeonse Shortage

[Image source=Yonhap News]

[Asia Economy Reporter Onyu Lim] Since the regulation of the '2-year mandatory residence for reconstruction' was withdrawn, the supply of jeonse (long-term lease) in Seoul has sharply increased.

According to real estate big data company Asil on the 4th, the supply of apartment jeonse in Seoul as of the previous day increased by 11.4% compared to two months ago. Among the 24 autonomous districts, Dongdaemun-gu recorded the highest increase rate in jeonse listings at 92.3%.

In addition, Eunpyeong-gu (76.6%), Gwangjin-gu (40.2%), Nowon-gu (33.5%), Seongdong-gu (28.4%), Dongjak-gu (27.5%), Dobong-gu (24.5%), Yongsan-gu (22.4%), Gwanak-gu (19.5%), Jungnang-gu (19.0%), Gangdong-gu (18.8%), Jongno-gu (17.2%), Guro-gu (16.9%), Yeongdeungpo-gu (14.1%), Gangbuk-gu (13.7%), Gangnam-gu (13.1%), and Geumcheon-gu (11.5%) also recorded double-digit growth rates.

This is largely interpreted as the effect of the government and ruling party announcing in mid-July that they would scrap the bill mandating a 2-year residence requirement for reconstruction in speculative overheated districts.

In Seoul’s Gangnam area, many old reconstruction apartment complexes are worn and inconvenient, and owners often live outside the area while renting out their units as jeonse or monthly rent. However, when the government announced in the June 17 real estate measures last year that reconstruction association members must reside for more than two years to obtain move-in rights, cases of owners evicting tenants and moving into their own homes surged. Some owners even resorted to loopholes by leaving their homes vacant while registering their residence there.

However, as the government and ruling party withdrew the policy, many owners began renting out their homes again, leading to a sharp increase in jeonse supply, especially in reconstruction-promoting complexes and those about to be occupied. For example, the Eonma Apartment in Daechi-dong, a major reconstruction complex in Gangnam, saw its jeonse listings increase 3.3 times from 85 on July 3 to 279 as of the previous day. The Le El Daechi in the same neighborhood, which starts occupancy this month, saw its jeonse listings surge 3.8 times from 36 to 136 during the same period.

Yoo Geosang, co-CEO of Asil, explained, "The lifting of the residence requirement for reconstruction association members has once again confirmed the 'paradox of regulation,' where jeonse supply that had been blocked increases. Jeonse listings are pouring out mainly in reconstruction-promoting complexes and those about to be occupied."

However, the number of apartment move-ins in Seoul this fall (September to November) is expected to be around 6,304 households, which is less than the same period last year (about 7,740 households), raising concerns about instability in the jeonse market. Also, in the past two months, jeonse supply has decreased in Mapo-gu (-36.5%), Jung-gu (-29.2%), Yangcheon-gu (-16.6%), Gangseo-gu (-6.5%), Seodaemun-gu (-6.0%), and Songpa-gu (-5.7%).

Yeo Kyung-hee, senior researcher at Real Estate 114, said, "There are still many opinions in the real estate brokerage market that jeonse supply is scarce. Even if jeonse listings come out mainly in reconstruction-promoting complexes and those about to be occupied due to the abolition of the 2-year residence bill for reconstruction association members, owners expecting a 4-year lease renewal contract may offer jeonse at high prices."

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