Apartment 'Kkangtong Jeonse' Warning... Risky Transaction Rate Exceeds 25%

The ratio of jeonse prices to sale prices (jeonse price ratio) exceeding 80%, known as 'Kkangtong Jeonse' transactions, has surpassed 25% as apartment sale prices decline and jeonse prices rise.

Quarterly Difference Between Average Apartment Sale and Jeonse Transaction Prices (Data=Real Estate R114). Based on the survey results as of February 14, cases where both sale and Jeonse transactions occurred at least once within the same complex and same area during each quarter were analyzed.

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On the 19th, Real Estate R114 analyzed actual transaction data from the Ministry of Land, Infrastructure and Transport and found that the proportion of transactions with a jeonse price ratio of 80% or higher increased by 6.5 percentage points, from 19.4% in the second quarter of 2023 to 25.9% in the fourth quarter of last year.

In the fourth quarter, the proportion of transactions with a jeonse price ratio of 80% or higher was high mainly in provincial areas such as Jeonbuk (57.3%), Chungbuk (55.3%), Gyeongbuk (54.2%), and Gyeongnam (48.1%). Seoul (5.1%), Sejong (7.5%), Jeju (12.9%), Gyeonggi (19.0%), and Incheon (19.9%) showed relatively low proportions.

The gap between sale prices and jeonse prices is also gradually narrowing. Analyzing cases where both sale and jeonse transactions were made at least once in the same apartment complex and area, the gap widened significantly from 68.47 million KRW in the first quarter of last year to 115.87 million KRW in the third quarter, then decreased to 53.25 million KRW in the fourth quarter. As of January this year, it further decreased to 43.32 million KRW.

By region, the price difference between sale and jeonse as of the fourth quarter was largest in Seoul at 465.92 million KRW and smallest in Gyeongbuk at 4.27 million KRW. The order follows Jeonbuk (9.22 million KRW), Chungbuk (15.41 million KRW), Chungnam (17.63 million KRW), Gyeongnam (18.73 million KRW), Jeonnam (25.88 million KRW), and Gangwon (27.64 million KRW).

The price difference between sale and jeonse by region was 175.99 million KRW in the metropolitan area and 47.43 million KRW in provincial areas.

When the price gap between jeonse and sale narrows, the issue of Kkangtong Jeonse can arise. Considering that the jeonse price ratio is high mainly in provincial areas where the housing market is sluggish, caution against Kkangtong Jeonse is necessary rather than activating investment demand such as gap investment.

Since sales transactions are mainly conducted with relatively cheap urgent sale properties compared to market prices, and jeonse contracts are made at higher prices than before, the proportion of Kkangtong Jeonse identified through actual transaction prices may be calculated as higher than the actual figure.

Yeokyung Hee, Senior Researcher at Real Estate R114, said, "Considering that the jeonse price ratio is rising due to falling apartment prices and rising jeonse prices, it is time to be alert to Kkangtong Jeonse, especially in small provincial cities." She added, "Such houses may have restrictions on subscribing to jeonse deposit guarantee insurance or difficulties in refunding deposits, so special caution is required when making transactions."

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