[6·17 Real Estate Measures] 2030 Generation's Gap Investment Expedition to Provinces... Resembling the Bitcoin Craze

Active Use of KakaoTalk and YouTube
Encouraging Speculation Like Stock Leading Rooms

[Asia Economy Reporter Donghyun Choi] The government’s recent measures specifically target gap investment because gap investment has recently been identified as a major cause of apartment price increases not only in the metropolitan area but also in provincial regions. Gap investment is highly speculative since it leverages tenants' jeonse deposits, making the entry barrier low and most cases not intended for actual residence.

Gap investment requires only the capital equivalent to the difference, or 'gap,' between the sale price and the jeonse price, and the jeonse price ratio is an indicator that reflects this. According to statistics from the Korea Real Estate Board, the average jeonse price ratio for apartments last month was about 60.8% in Seoul, 65% in the metropolitan area, and 65.3% in provincial areas. For newly built apartments in Seoul less than one year old, the jeonse price ratio approaches 90%. Assuming a gap investment where a newly built apartment in Seoul worth 1 billion KRW is purchased for 100 million KRW, if the market price rises by just 100 million KRW, the return on investment is 100%. This explains why many people rush into gap investment. According to data released by the Ministry of Land, Infrastructure and Transport with this policy announcement, the proportion of home purchases with deposit succession in the four Gangnam districts (Seocho, Gangnam, Songpa, Gangdong) surged from 57.5% in January to 72.7% last month.

Because of its easy accessibility and high returns, gap investment is mainly pursued by the relatively lower-income 20s and 30s age group. A real estate expert said, "The recent interest of young people in real estate investment resembles the past Bitcoin craze." The way they obtain investment information is no longer solely dependent on real estate agencies but actively utilizes various social networking services (SNS) such as YouTube, online cafes, and KakaoTalk group chats. One popular application frequently used by gap investors even created a category called 'gap price.' When setting the gap price below 10 million KRW for Seoul apartments on this app, listings flooded across Seoul, including Gangnam. On YouTube, videos related to gap investment by famous instructors have garnered hundreds of thousands of views. According to an analysis of 'Apartment Move-in Plans' for buyers of apartments priced over 300 million KRW in speculative overheated zones, submitted by the Ministry of Land to then-Democratic Peace Party lawmaker Jeong Dong-young in February, 34.9% of buyers in their 30s purchased apartments for rental purposes rather than actual residence.

Gap investment is not limited to specific properties or regions. Recently, so-called 'expedition gap investment' has spread beyond the metropolitan area to provincial small cities, involving apartments and officetels. In a KakaoTalk group chat with about 1,000 members, similar to stock trading rooms, there were cases where speculation was encouraged with phrases like "This time, we’re sweeping the 00 area." Targeted areas are rich in development prospects. For example, in Ochang-eup, Cheongju City, where the hosting of a synchrotron accelerator was recently confirmed, an 84.9㎡ unit of 'Hanshin The Hue Central Park' was traded this month for 542 million KRW, rising by 200 million KRW compared to 300 million KRW at the beginning of the year.

Experts expressed concerns that while the government’s policy may curb some gap investment, it could cause other market distortions. Yang Ji-young, head of Yang Ji-young R&C Research Institute, said, "Strengthening regulations on mortgage loans and jeonse loans may partially block gap investment, but it could also tighten conditions for genuine buyers who want to purchase homes with loans due to anxiety over rising house prices, leading to significant side effects."