Jeonse, Even If Available, Not Rented... Nationwide Supply-Demand Index Hits Record Low

Last Week 81.3... 9 Consecutive Weeks of Decline
Incheon '56.6' Lowest in the Capital Area
Demand Drought in Capital Area and 5 Major Metropolitan Cities
Continuing Rise in Loan Interest Rate Burden
Simultaneous Slump in Sales and Jeonse

[Asia Economy Reporter Hwang Seoyul] #Lee Do-eun, a young professional who took out a jeonse loan with a 6-month variable interest rate, now faces paying interest at a rate of 5.28%, which is 1.44 percentage points higher than the original 3.84% starting this month. As the base interest rate is expected to continue rising, Lee has resolved to start repaying the principal along with the interest from next month's salary. Lee said, "Jeonse still has more merit than monthly rent, but if the base interest rate keeps rising, I might consider monthly rent for the next contract."

With the base interest rate entering the 3% range, demand-side consumers have reached a point where they do not seek jeonse even when it is available in the rental market. The nationwide jeonse supply-demand index, which gauges jeonse demand and supply, recorded its lowest level since statistics began being compiled.

According to the weekly time-series statistics from KB Real Estate on the 24th, last week the nationwide jeonse supply-demand index was 81.3, marking the lowest level since the statistics started in July 2003. The jeonse supply-demand index ranges from 0 to 200, where a value above 100 indicates supply shortage, and below 100 indicates demand shortage.

The Bank of Korea has raised the base interest rate five consecutive times since April, pushing it into the 3% range. Consequently, the jeonse supply-demand index has been declining for nine consecutive weeks since the third week of August (105.4). Notably, in the second week of September, it fell below 100 for the first time since the third week of February 2019 (99.9), entering a demand shortage phase for the first time in 3 years and 8 months.

[Image source=Yonhap News]

Regionally, the demand shortage for jeonse is intensifying day by day. The metropolitan area recorded its lowest index since the first week of January 2009 (63.3). Specifically, Incheon posted the lowest index in the metropolitan area at 56.6. Seoul also dropped sharply by 10.5 points compared to the previous week to 69.3, marking its lowest level since January 2009 (66.9). Gyeonggi Province fell 7.3 points from the previous week to 64.9, the lowest since the third week of January 2009 (55.8).

The five major metropolitan cities also recorded a demand shortage state with an index of 69.5, the lowest since the fourth week of April when related statistics began being compiled. In particular, Daejeon was at 60.4, Daegu at 62.9, and Gwangju at 64.1, all in the 60s range. Busan and Ulsan showed somewhat better indices at 74.9 and 88.1 respectively, but both dropped significantly by 10.4 points and 27.3 points compared to the previous week. Other provinces still show more demand than supply with an index of 124.2, but this too has been declining for nine consecutive weeks since the third week of August (142.6).

Experts explain that the availability of jeonse loans has caused both sales and jeonse demand to fall simultaneously. Song Seunghyun, CEO of City and Economy, said, "Previously, when sales demand decreased, rental demand increased, but since both are affected by loans, they are collapsing together," adding, "As jeonse’s role in cushioning the decline in sales prices weakens, there is a high possibility that sales prices will not achieve a soft landing."

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