Seoul Jeonse Houses, Supply Exceeds Demand... 'Reversal' After 2 Years and 2 Months

Seoul Apartment Jeonse, Supply Exceeds Demand
Clear Demand Contraction Compared to Last Winter
No Moving Due to New Lease Law and Loan Regulations

Real estate listings posted at licensed real estate offices in Seoul [Image source=Yonhap News]

The apartment jeonse supply-demand index in Seoul has fallen below the baseline of 100 for the first time in about 2 years and 2 months. An index below 100 means that there are more landlords looking for tenants than people searching for jeonse homes. Analysts suggest that the real estate market, including both sales and jeonse, is freezing up due to a combination of weakened sales demand, soaring jeonse prices, and tightened loan regulations.

According to the Korea Real Estate Board on the 10th, this week’s Seoul apartment jeonse supply-demand index recorded 99.1, down 0.9 points from last week’s 100.0. The index is based on 100, and a value below this indicates that supply exceeds demand. This is the first time the Seoul apartment jeonse supply-demand index has dropped below 100 since October 21, 2019 (99.99).

Although winter is generally an off-season for jeonse, it is somewhat unusual considering that jeonse demand was relatively high immediately after the November college entrance exam. In fact, last December, the index remained high at 127.5 to 129.2, and in December 2019, it was also high at 104.6 to 113.7, indicating demand exceeded supply.

The contraction of this year’s jeonse market is interpreted as being due to the contract renewal request system introduced at the end of July last year taking hold, which sharply reduced new mobility demand. Additionally, recent tightening of loan regulations by financial authorities and interest rate hikes have made it difficult for tenants to afford the high jeonse prices, according to some opinions.

In Seoul, only the southwestern area, including Yangcheon, Gangseo, and Guro districts, saw a slight increase in the index to 100.4 this week compared to last week, while the other areas?northern, central, northeastern, northwestern, Gangnam, and southeastern zones?all experienced declines. Real estate agents on the ground explain that existing tenants are refraining from moving as much as possible because they can exercise the contract renewal right once and stay for another two years within the 5% rent increase cap.

Weakened sales demand also appears to be affecting the jeonse market. This week, the Seoul apartment sales supply-demand index recorded 96.4, remaining below the baseline for the fourth consecutive week. The perception that both sales and jeonse prices have peaked is spreading, causing a chill across the overall real estate market.

Notably, this week the nationwide apartment sales supply-demand index also fell below the baseline to 99.2, marking the first time in about 1 year and 6 months since June 22, last year (99.9). The cooling of buying enthusiasm is occurring not only in Seoul and Gyeonggi Province but also in other regions. Among major local areas this week, indices notably declined in Busan (98.6), Daegu (88.7), Ulsan (97.3), and Sejong (88.1).

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