[Practical Finance] Newly Built 'Jipdeuri Complexes' Also Change the Terrain

[Asia Economy Reporter Kim Yuri] # The 84㎡ (exclusive area) apartment in 'Hillstate Sinchon' in Bukahyeon-dong, Seodaemun-gu, Seoul, which began move-ins this month, was traded for 1.6 billion KRW last month. At the time of general sale, the average sale price of this complex was 24.28 million KRW per 3.3㎡, which amounted to 837 million to 899 million KRW for the 84㎡ unit. This means it rose by more than 700 million KRW compared to the sale price. The jeonse (long-term lease) market price also approached the sale price, ranging from 600 million to 800 million KRW.

Demanders' preference for 'newly built' and 'large complexes' continues, causing new apartment prices in Seoul to soar. Buyers' interest in complex designs and internal structures that differentiate from existing apartments, as well as various community facilities, is fully reflected in the prices. In Seoul, about 70% of new supply comes from redevelopment and reconstruction projects, so many are located near workplaces or have well-developed transportation infrastructure, which further increases the appeal of new apartments.

Although apartment prices have been rising steadily over the past few years, the movement in new apartments has been even more pronounced. According to Real Estate 114, as of the end of May, the price of newly built apartments within 5 years of move-in in Seoul was 1.38743 billion KRW, the highest. This contrasts sharply with apartments 6 to 10 years old at 1.17997 billion KRW and those over 10 years old at 916.42 million KRW.

◆ Relatively Affordable New Apartments... The Landscape of 'Move-in Jeonse' is Changing

The landscape of these 'housewarming complexes' is changing recently. Due to various laws, policies, and supply conditions, the 'move-in cheap jeonse' that allowed relatively easy access to new apartments is gradually disappearing.

The jeonse market price for the 84㎡ unit at SK Leaders View in Gongdeok, Mapo-gu, which begins move-ins this month, is in the high 800 million to 1 billion KRW range. This surpasses the sale price of 750 million to 800 million KRW. In large new complexes where many jeonse units are released at once, jeonse prices are usually lower than market prices, but recently, due to a shortage of jeonse supply, prices are soaring. This reflects the significant rise in surrounding jeonse prices and the preemptive price increase considering the contract renewal right and rent ceiling system under the revised Lease Protection Act.

One reason for the limited supply is the government's strengthening of 'actual residence requirements' through various policies. Since the August 2, 2017 measures, homeowners must meet not only the 'holding period of more than 2 years after acquiring the house' but also the 'actual residence for more than 2 years' to qualify for capital gains tax exemption. The September 13, 2018 measures added a 2-year actual residence requirement for the long-term holding special deduction on capital gains exceeding 900 million KRW. The December 16, 2022 measures require holding for more than 10 years (40%) and actual residence for more than 10 years (40%) to receive the maximum deduction rate (80%). Due to these circumstances, real estate agencies explain that the number of 'owners living in their houses to meet residence requirements' has increased. The industry expects that when the 5-year residence obligation for general buyers under the private land sale price ceiling system is implemented in February next year, the supply of new apartment jeonse will decrease further.

◆ Decrease in Next Year's Move-in Supply... Major Move-in Complexes in Seoul from September to December

Next year's move-in supply in Seoul is also expected to decrease. The total is 36,000 households, a sharp 32% drop compared to this year's 53,000 households. Experts advise that although prices of move-in apartments have risen significantly due to buyers' preference for new apartments, considering the decrease in supply, those considering purchasing apartments between this year and next should pay close attention to scheduled move-in complexes and carefully examine urgent sales.

According to Real Estate 114, a total of 10,479 households are preparing to move in within the remaining four months of this year in Seoul. Housewarmings for complexes in the Gangnam area, which have attracted significant buyer interest since the sale, are scheduled for this fall. These include Gaepo Raemian Forest in Gaepo-dong, Gangnam-gu (September, 2,296 households), Godeok Central Prugio in Godeok-dong, Gangdong-gu (September, 656 households), and Raemian Leaders One in Seocho-dong, Seocho-gu (October, 1,317 households). Move-ins continue in Shingil New Town as well. Hillstate Classian in Shingil-dong, Yeongdeungpo-gu (October, 1,476 households) and Shingil Park Xi (December, 641 households) are preparing for housewarmings. Large complexes in northern Seoul are also preparing for year-end move-ins. Nowon Dream Green in Sanggye-dong, Nowon-gu (1,062 households) and Dream Forest I-Park in Jangwi-dong, Seongbuk-gu (1,711 households) are preparing for December housewarmings.