Jeonse Bubble Collapse... Seoul Average Price Falls Below 600 Million Won

National Average Jeonse Price Falls to 200 Million KRW Range
High Interest Rates and Jeonse Fraud Deepen Jeonse Avoidance
However, Recent Sharp Rise in Monthly Rent Causes U-Turn Trend

As high interest rates caused the jeonse bubble to collapse, the average nationwide apartment jeonse price in February fell from the 300 million KRW range to the 200 million KRW range, and the average Seoul apartment jeonse price dropped from the 600 million KRW range to the 500 million KRW range. Concerns about reverse jeonse, where landlords struggle to return deposits to tenants, are growing.

According to KB Real Estate on the 1st, the average nationwide apartment jeonse price in February was 297.82 million KRW. This is a decrease of 8.13 million KRW compared to 305.95 million KRW in January. The nationwide average apartment jeonse price falling to the 200 million KRW range is the first time in 25 months since January 2021 (295.28 million KRW). After reaching a peak of 341.88 million KRW in June 2022 due to the impact of the new lease law introduced in July 2020, prices have continued to decline.

The average Seoul apartment jeonse price in February also fell below the 600 million KRW mark, recording 592.97 million KRW. This is a decrease of 17.34 million KRW from 610.31 million KRW in January. The average Seoul apartment jeonse price falling to the 500 million KRW range is the first time in 24 months since February 2021 (598.29 million KRW). This also continued to decline after hitting a peak of 677.88 million KRW in June 2022.

Apartment jeonse prices have been continuously falling as tenants avoid jeonse and prefer monthly rent due to the significantly increased interest burden caused by high interest rates. The recent large-scale jeonse fraud, which has become a social issue, is also cited as one of the reasons for avoiding jeonse.

With a substantial number of new apartments scheduled for occupancy, the downward trend in jeonse prices is unlikely to reverse easily. According to the Korea Real Estate Agency’s information on scheduled occupancy of multi-family housing, the number of units to be occupied over the two years of 2023 and 2024 is 796,000, a 26% increase compared to 633,000 units occupied in the previous two years. In particular, the number of units to be occupied this year is expected to be 443,000, a 31.4% increase from 337,044 units last year.

Especially in Seoul, where new lease laws caused jeonse prices to rise sharply in Gangnam areas such as Gangnam, Seocho, and Songpa, a large volume of new occupancy is concentrated, raising concerns about reverse jeonse in these areas. For example, despite the occupancy starting on the 28th of last month at Gaepo Xi Presidents in Gaepo-dong, Gangnam-gu, Seoul, there are about 1,300 jeonse units available. As a result, the jeonse price for an 84㎡ unit has dropped to 850 million KRW. The impact of new occupancy has also caused jeonse prices for older apartments to fall significantly, making it difficult for landlords to return deposits.

However, with the recent preference for monthly rent causing monthly rent prices to rise and jeonse prices to fall sharply, there are signs that tenants are trying to return to jeonse. According to an analysis by Real Estate R114 of the Ministry of Land, Infrastructure and Transport’s actual transaction data for apartment jeonse and monthly rent, the proportion of jeonse in new lease contracts signed in January this year was 58.4% (22,033 cases), an increase of more than 5 percentage points compared to 52.6% in the previous month.

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