With New Lease Protection Law, Seoul Jeonse Supply Drops 16%... Average Nears 500 Million Won

As of the previous day, there are 32,505 Seoul apartment jeonse listings... 15.7% decrease in 2 weeks
Average Seoul apartment jeonse price in July is 499.22 million KRW... Expected to surpass 500 million KRW in August

[Asia Economy Reporter Onyu Lim] Two weeks after the implementation of the rent ceiling system and the right to request contract renewal, the number of apartment jeonse listings in Seoul has decreased by nearly 16%.

According to 'Apartment Real Transaction Price (Asil)', a real estate big data company, as of the previous day, the number of jeonse listings for Seoul apartments was 32,505. Considering that the number of listings was 38,557 on the 29th of last month, just before the revised Housing Lease Protection Act came into effect, this represents a 15.7% decrease in two weeks. The decrease in jeonse listings occurred across all 25 autonomous districts in Seoul. The decline was particularly notable in areas with a concentration of relatively low- to mid-priced jeonse. In Eunpyeong-gu, jeonse listings plummeted by 37.0% during this period. Jungnang-gu also saw a 36.4% decrease, and in the southwestern area of Guro-gu, jeonse listings dropped by 28.6%.

In fact, at Nokbeon Station E-Pyeonhansesang Castle in Eungam-dong, Eunpyeong-gu, the number of jeonse listings was 329 at the end of last month but has now fallen to only 116, about one-third of that number. A 44㎡ apartment in this complex was leased for 390 million KRW on the 21st of last month, but on the 12th of this month, it was traded for 500 million KRW. The current asking price has soared to as high as 600 million KRW.

As jeonse listings decrease and prices soar, tenants’ burdens are increasing. According to the monthly housing price trend by KB Kookmin Bank’s real estate platform LiveOn, the average jeonse price for Seoul apartments was 499.22 million KRW last month, approaching the 500 million KRW mark. Compared to July 2018, two years ago, when the average was 450.46 million KRW, this is an increase of 48.76 million KRW (10.8%).

The rise in jeonse prices has been particularly pronounced over the past year. Compared to July last year, when the average was 463.54 million KRW, it has increased by 35.68 million KRW. The average jeonse price for Seoul apartments entered the 400 million KRW range in March 2016 at 402.44 million KRW, and surpassed 450 million KRW in May 2018 at 450.09 million KRW. Considering the sharp rise in jeonse prices following the recent implementation of the three lease laws, the average jeonse price this month is expected to exceed 500 million KRW.

Based on an 86.95㎡ apartment, the area with the highest increase in jeonse price over two years was Seocho-gu, rising by 114.21 million KRW (17.3%). Following were Gangnam-gu with an increase of 102.53 million KRW (13.7%) and Songpa-gu with 57.57 million KRW (11.1%), placing the three Gangnam districts at the top. The area with the smallest increase was Dobong-gu, which rose by only 13.48 million KRW (4.4%).

Despite the average jeonse price rising by more than 10%, the rent ceiling system limits the increase to 5% upon lease renewal, raising concerns about conflicts between landlords and tenants. A representative from real estate agency A in Daechi-dong, Gangnam-gu, Seoul, said, "If there were many jeonse listings, it would be better, but since there is a shortage of listings in the market, some tenants are willing to renew their contracts by paying more than the legal ceiling."