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Beyond the Sales Market and Transaction Cliff to Transaction Extinction
Inventory Accumulation in Jeonse and Wolse Market... Concerns Over Reverse Jeonse Crisis

Photo by Asia Economy

Due to interest rate hikes and a downward trend in apartment prices, buyer sentiment has hit its lowest point in 3 years and 2 months. While the sales market has entered a state of transaction extinction beyond a transaction cliff, the jeonse and monthly rent market is also experiencing a severe backlog of listings, raising concerns about a reverse jeonse crisis.

According to the Korea Real Estate Board on the 2nd, this week’s Seoul apartment sales supply-demand index fell by 1.1 points (p) to 81.8 from last week’s 82.9. Although the supply-demand index is a relative evaluation at the time of the survey, the simple figure is the lowest since July 8, 2019 (83.2), marking the lowest in 3 years and 2 months. When the sales supply-demand index is below the baseline (100), it means there are more people wanting to sell houses than those wanting to buy in the housing market.

Among the five major regions in Seoul, all indices declined compared to last week, with the Northeast area, including Nowon and Dobong districts, recording 74.9, down from 76.7 last week, showing a notable downward trend and the lowest index among the five regions.

The Southeast area, which includes the Gangnam 4 districts, dropped 0.7p from 89.4 last week to 88.7 this week, and the Central area, including Yongsan and Jongno districts, fell 1.2p to 77.2 compared to the previous week. The Northwest area, including Eunpyeong, Seodaemun, and Mapo districts, recorded 75.7, and the Southwest area, including Gangseo and Yangcheon districts, recorded 87.3, both down 0.9p and 0.7p respectively from last week.

The contraction in buyer sentiment is already reflected in historically worst transaction volumes. According to the Ministry of Land, Infrastructure and Transport, nationwide apartment transaction volume from the beginning of this year to July was 205,970 cases, a 52.4% decrease compared to the same period last year. According to Seoul Real Estate Information Plaza data, the number of apartment sales transactions in Seoul in July was 639 cases, the lowest since statistics began in January 2006. Compared to July last year (4,679 cases), it decreased by 86.4%.

Listings are steadily accumulating. According to the real estate big data company Asil, as of this date, the number of apartment listings (for sale) in Seoul is 62,280, a 29.3% increase compared to 48,169 listings six months ago.

Intermittent transactions that do occur fail to sustain previous price levels and collapse. According to the Korea Real Estate Board, this week’s (surveyed on August 29) Seoul apartment prices fell by 0.13%, widening the decline compared to last week’s (-0.11%). This is the largest weekly drop since the survey on January 28, 2019 (-0.14%).

The Real Estate Board analyzed, "Transaction sentiment is contracting due to concerns that further interest rate hikes and the downward trend in housing prices will continue," adding, "The situation where intermittent transactions mainly of urgent sales are perceived as market prices has continued, resulting in an expanded decline compared to last week."

Photo by Asia Economy

The jeonse and monthly rent lease market is no different from the sales market.

The Seoul apartment jeonse supply-demand index this week was 86.7, down from 88.7 last week. This is the lowest figure in about 3 years and 1 month since the survey on July 29, 2019 (88.0).

Although the autumn moving season is approaching, jeonse and monthly rent listings are overflowing while demand has disappeared. According to Asil statistics, recent jeonse and monthly rent listings for Seoul apartments exceed 55,000. Compared to about two years ago on September 1, 2020 (about 27,000 listings), this is more than double.

Across Seoul, contracts are only made when the jeonse price is lowered by 100 million to 200 million KRW or more below the market price, and cases where landlords with impending jeonse contract expirations fail to find tenants are also increasing rapidly.

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