Impact of Jeonse Price Decline... Increase in Jeonse Proportion Among New Apartment Contracts

[Asia Economy Reporter Ryu Tae-min] Last month, the proportion of tenants choosing jeonse (long-term lease) in new apartment jeonse and monthly rent contracts increased. This is attributed to the continued decline in jeonse prices.

On the 23rd, Real Estate R114 analyzed the Ministry of Land, Infrastructure and Transport's actual transaction data for apartment jeonse and monthly rent, revealing that the number of new jeonse contracts signed last month was 22,023. This accounts for 58.4% of the total, significantly exceeding half.

The proportion of new jeonse contracts began to decline from the second half of last year. In December of the same year, it decreased to 52.6% of the total with 22,806 contracts. Since then, the proportion has expanded again this year. Meanwhile, the proportion of jeonse in renewal contracts has remained in the high 60% range since July last year (70.8%).

By region, the proportion of new jeonse contracts last month was 61.3% in the metropolitan area and 54.2% in provincial areas, showing an increase compared to December last year. In particular, in Seoul, new jeonse contracts increased centered around Songpa-gu and Gangdong-gu this year, with both the number of transactions (4,567 → 4,752) and the proportion (45.9% → 57.8%) rising compared to the previous month. This is interpreted as being driven by a significant drop in jeonse prices due to concentrated recent move-in volumes and increased demand for switching jeonse contracts.

Additionally, although jeonse transactions decreased last year due to continued preference for monthly rent caused by loan interest burdens, reverse jeonse, and concerns about jeonse fraud, the decline in jeonse prices and relatively higher monthly rent burdens appear to have increased the proportion of new apartment jeonse contracts. Apartments have a lower jeonse-to-sale price ratio compared to other housing types such as villas or multi-family houses, which is also analyzed as a factor reducing the risk of 'empty jeonse' (Kkangtong Jeonse).

Real Estate R114 forecasted, “As the weakness in jeonse prices continues, there is a high possibility that demand will continue for switching to newly built apartments or areas with good school districts and proximity to work, especially in the metropolitan apartment market, without using renewal rights at lower prices.”

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