Sales followed by a slowdown in Jeonse... Billions of won drop transactions surge in Jamsil, Daechi, and Mokdong

Apartment buildings in the Seoul area (Photo by Yonhap News)

[Asia Economy Reporter Ryu Tae-min] Following the sales market, the Seoul apartment jeonse (long-term lease) market is also rapidly freezing up. In major areas of Seoul with high school district demand such as Daechi, Jamsil, and Mokdong, the number of "urgent jeonse" contracts is increasing, leading to a surge in falling transactions. This appears to be due to tenants leaving amid the price burden from last year's sharp rise in jeonse prices, combined with loan regulations and rising interest rates.

According to the Korea Real Estate Board on the 10th, the Seoul apartment jeonse supply-demand index for the first week of this month (as of the 3rd) recorded 94.5, down 1.2 points from the previous week (95.7). Since December last year, the Seoul jeonse supply-demand index has fallen below the baseline of 100 for the first time in about 1 year and 6 months and has remained below the baseline for five consecutive weeks. When the jeonse supply-demand index is below the baseline, it means supply exceeds demand.

In major areas of Seoul, jeonse actual transaction prices have dropped by hundreds of millions of won. According to the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system, two jeonse contracts for Els 84.8㎡ (exclusive area) in Jamsil-dong, Songpa-gu, were signed at a record high of 1.5 billion won in November last year, but in December, the price fell by 270 million won to 1.23 billion won.

The same applies to Daechi-dong and some complexes in Mokdong, known as the top school districts. Eunma 84.43㎡ in Daechi-dong, Gangnam-gu, saw jeonse prices rise to a peak of 1.1 billion won in October last year, but new transactions were made at 820 million won at the end of last year. Shinsigaji 7 Complex 66.6㎡ in Mokdong, Yangcheon-gu, was traded at 870 million won in November last year, but in December, a jeonse contract was signed at 700 million won.

The overall price increase trend in Seoul has also slowed. The Seoul apartment jeonse price increase rate, which was 0.10% in the first week of December last year, recorded virtually flat growth at 0.02% in the first week of this month. Seongbuk-gu and Geumcheon-gu even showed a decline of -0.01% each. Nowon, Eunpyeong, and Seodaemun-gu recorded a 0.00% increase rate, indicating the upward trend has stopped.

Accumulating Jeonse Listings... Increased Financial Burden Due to Loan Regulations and Interest Rate Hikes

This change in trend is interpreted as due to the backlog of listings. According to real estate information company Apartment Actual Transaction (Asil), as of the 9th, the number of jeonse listings for Seoul apartments was 31,261, an increase of 2,061 listings (7%) compared to 29,200 listings on November 9 last year, two months ago. During this period, Yangcheon-gu surged from 683 to 1,031 listings, an increase of 348 listings (50.9%), Seodaemun-gu from 716 to 1,007 listings, an increase of 291 listings (40.6%). Songpa-gu also increased by 700 listings (24%) from 2,916 to 3,616.

Moreover, since last year, as jeonse prices surged in each apartment complex, the number of cases exercising the right to renew contracts has gradually increased, significantly reducing new jeonse demand. Recently, with the combined effects of loan regulations and interest rate hikes, tenants' financial burdens have also increased.

Song Seung-hyun, CEO of Urban and Economy, explained, "Due to loan regulations and interest rate hikes affecting financing, demanders are finding it difficult to bear the sharply increased jeonse prices. Unless it is an urgent jeonse, price formation between landlords and tenants is not easily achieved, leading to an accumulation of listings."

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