Record High Seoul Apartment Jeonse and Monthly Rent Transactions in H1... Increased Mid-Low Price Transactions Amid High Interest Rates

116,000 Jeonse and Monthly Rent Transactions in the First Half of the Year

Highest Since Statistics Began in 2011

Lowest Price Transactions Most Common in Monthly Rent

[Asia Economy Reporters Minyoung Kim, Wanyong Cha] The volume of apartment jeonse and monthly rent transactions in Seoul reached an all-time high in the first half of this year. In particular, due to increased financial burden from interest rate hikes, the proportion of mid- to low-priced transactions increased compared to last year. With the likelihood of prolonged interest rate hikes, demand is expected to concentrate on low-priced listings in the jeonse and monthly rent market.

◆ Intensification of ‘Jeonse Turning into Monthly Rent’... Monthly Rent Hits Record High = On the 19th, Zigbang analyzed actual transaction prices from the Ministry of Land, Infrastructure and Transport and found that the total number of apartment jeonse and monthly rent transactions in Seoul in the first half of this year was 116,014, the highest since related statistics began in 2011. Monthly rent transactions have steadily increased since the second half of 2017, surpassing 40,000 with 44,973 transactions in the second half of 2022, up from 28,043 in the first half of 2020, and recorded 47,588 in the first half of this year, marking an all-time high. However, in the second half of the year, transaction volume slowed, with only 13,021 transactions as of the 13th.

The increase in Seoul apartment jeonse and monthly rent transactions is a phenomenon caused by the combination of a transaction freeze and price decline, with properties moving from sales to jeonse or monthly rent listings. From the landlord’s perspective, rather than selling at a bargain price, they prefer to lease, while tenants make the practical choice of jeonse or monthly rent due to concerns about price drops.

Professor Han Mundo of the Department of Finance and Real Estate at Yonsei University Graduate School of Political Economy explained, "Even when landlords put properties on the market as urgent sales, transactions do not proceed well, so they are switching to jeonse. Additionally, as interest rate hikes accelerate, the burden of monthly rent is less than the interest on jeonse loans, causing both jeonse and monthly rent to increase simultaneously."

◆ Popularity of Mid- to Low-Priced Properties Between 200 Million and 600 Million KRW as Interest Rates Rise = As the trend of interest rate hikes becomes clearer, the pattern of jeonse and monthly rent transactions has changed. Transactions are centered on mid- to low-priced properties this year. In fact, the proportion of jeonse transactions by price range in Seoul in the first half of this year was △ over 600 million KRW at 30.9%, △ over 400 million to 600 million KRW at 29.5%, △ over 200 million to 400 million KRW at 29.3%, and △ under 200 million KRW at 10.3%. The proportion of transactions over 600 million KRW was 33.2% in the second half of last year but decreased this year, while the proportion of transactions between 200 million and 600 million KRW increased from 56.4% to 58.8%.

In monthly rent transactions, high-priced lease transactions are decreasing. The proportion of monthly rent transactions by converted deposit price in Seoul in the first half of this year was △ over 600 million KRW at 29.3%, △ over 200 million to 400 million KRW at 25.4%, △ under 200 million KRW at 25.3%, and △ over 400 million to 600 million KRW at 19.9%. Compared to the second half of last year, the proportion of transactions over 600 million KRW decreased (31.0% → 29.3%), while transactions between 200 million and 600 million KRW increased (39.4% → 45.3%). In the second half of this year, transactions under 200 million KRW accounted for the largest share at 28.5%, while transactions over 600 million KRW slightly decreased to 28.7%.

◆ Monthly Rent Prices Dropped? Increase in Semi-Jeonse Creates Illusion = The proportion of monthly rent transactions by price range in Seoul in the first half of this year was △ 500,000 KRW or less at 37.4%, △ over 500,000 to 1,000,000 KRW at 30.9%, △ over 1,000,000 to 2,000,000 KRW at 21.7%, △ over 2,000,000 to 3,000,000 KRW at 5.8%, and △ over 3,000,000 KRW at 4.2%. In the second half of the year, transactions under 500,000 KRW increased significantly to 42.1%, while the proportion of other price ranges slightly decreased. Notably, monthly rent transactions under 1,000,000 KRW fell below 70% in the second half of last year and the first half of this year but exceeded 70% again in the second half of this year. This includes cases where jeonse tenants convert the increase in jeonse deposit into monthly rent, which appears to have somewhat lowered monthly rent prices.

Ham Youngjin, head of the Big Data Lab, explained, "Due to the decline in jeonse prices and financial cost burdens, cases of contract renewals have increased, leading to transactions centered on mid- to low-priced properties. It seems that rather than bearing additional transaction prices through loans, people choose transactions that can reduce financial costs or fall within an affordable price range for households."

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