Over 70,000 Households in the Seoul Metropolitan Area See Jeonse Prices Drop Compared to Two Years Ago... Reverse Jeonse Warning Issued

Real Estate R114 "3% of total, under 300 households small-scale and old buildings mainly face reverse lease concerns"

[Asia Economy Reporter Kim Hyemin] Concerns over reverse jeonse are growing in apartments in the Seoul metropolitan area. Reverse jeonse refers to a situation where the market price has fallen below the jeonse contract price from two years ago, making it difficult for landlords to return the deposit.

On the 24th, Real Estate R114 compared the jeonse market prices of 2,784,030 apartments in the Seoul metropolitan area as of October this year with those from two years ago and found that prices had fallen for 2.8% (78,412 units) of the total.

By region, Incheon had the highest proportion of price declines. Out of 367,936 units, 22,192 units saw a drop in jeonse prices, accounting for 6% of the total. Gyeonggi Province recorded a 2.5% decline, with 34,292 units falling out of 1,390,253 units. Seoul saw a 2.1% decline, with 21,928 units out of 1,025,841 units experiencing a drop in jeonse prices.

Incheon’s main reason for the decline in jeonse prices was the influx of more than 40,000 new apartment units this year. With significant drops in housing prices, reverse price trends occurred mainly in older apartments in Jung-gu and Dong-gu. In Gyeonggi, concerns over reverse jeonse appeared in suburban areas, while in Seoul, they were seen in large complexes.

Looking at the Seoul metropolitan area apartments with jeonse prices lower than two years ago by building age, those over 30 years old accounted for the largest share at 33.5% (26,248 units). This was followed by ▲21-30 years old at 31.3%, ▲11-20 years old at 23.2%, ▲5 years or less at 7.8%, and ▲6-10 years old at 4.2%.

By complex size, small complexes with fewer than 300 units accounted for the highest share at 39.4% (30,892 units). This was followed by ▲1,500 units or more at 19.4%, ▲300-500 units at 17.8%, ▲500-700 units at 11.9%, ▲700-1,000 units at 8%, and ▲1,000-1,500 units at 3.5%. Real Estate R114 explained, "Complexes with fewer than 300 units tend to lack community facilities, while large complexes with over 1,500 units have seen a reduction in jeonse demand due to shifts to monthly rent and use of renewal rights, leading to an accumulation of listings and downward price adjustments."

Although the proportion of households at risk of reverse jeonse based on market prices is relatively low, the ongoing decline in both sales and jeonse markets suggests that the actual number of reverse jeonse listings in the market will increase. Yeo Kyung-hee, Senior Researcher at Real Estate R114, said, "With the recent increase in jeonse loan interest burdens and concerns over ‘empty jeonse’ (Kkangtong Jeonse), more tenants are opting for monthly rent. Therefore, areas with many apartment move-ins or past gap investments are likely to see an increase in jeonse listings priced lower than two years ago. In regions with high reverse jeonse concerns, landlords may put their homes on the market as urgent sales to return deposits to existing tenants, which could further widen the decline in jeonse prices."

Senior Researcher Yeo also advised, "Tenants should avoid moving into apartments where jeonse prices have recently dropped sharply and take protective measures such as subscribing to jeonse deposit return insurance to safeguard their deposits."

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