"High Even in Off-Season" Seoul Apartment Jeonse Price Increase Rate Hits 5-Year High

"Autumn Moving Season, Jeonse Price Increase Likely to Be Larger Than Last Year Due to Jeonse Property Shortage"

[Asia Economy Reporter Yuri Kim] This year, the jeonse prices of apartments in Seoul have risen by nearly 6%, marking the highest increase in five years since 2015. Despite being the off-season, the steady rise in jeonse prices is expected to accelerate further due to a shortage of listings as the autumn moving season begins.

According to Real Estate 114 on the 17th, the jeonse prices of Seoul apartments increased by 5.90% this year. This cumulative figure from January to August reflects a continuous upward trend for 16 months from May last year to August this year. Especially this year, due to the shortage of jeonse listings, the price increase was significant even during the traditional off-season months of July and August, sustaining the upward momentum.

Considering that the autumn moving season is currently in full swing, it is expected that jeonse prices will continue to soar for the time being. In particular, due to the impact of the three lease laws including the Jeonse and Monthly Rent Cap System and the Right to Request Contract Renewal, as well as social distancing measures, the jeonse market is moving mainly through contract renewals, with additional demand from pre-sale waiting lists joining the trend.

Looking at the changes in Seoul apartment jeonse prices during the autumn moving season (September to November) over the past 10 years since 2010, most years showed an increase of over 1%. The most stable autumn was in 2018, with a rise of 0.64%. On the other hand, in 2013 and 2015, when the supply of move-in units sharply decreased and the jeonse market was most unstable, prices jumped by 4.05% and 3.50% respectively during the autumn season. Yoon Ji-hae, Senior Researcher at Real Estate 114, said, "This autumn, due to the shortage of jeonse listings, the recent upward trend is likely to continue for the time being, and a higher jeonse price increase than last autumn's 1.29% is expected."

The implementation of the Right to Request Contract Renewal, which guarantees a contract period of up to four years, has resulted in a shortage of jeonse listings. Additionally, due to social distancing caused by COVID-19, there is a reluctance to show jeonse homes to strangers. As a result, the market is being reorganized mainly around contract renewals (transactions between landlords and existing tenants), which is a major cause of the reduction in jeonse circulation volume.

On the other hand, there is significant inflow of rental demand in downtown Seoul and certain areas of the metropolitan area. This is because, as recently announced by the government, 60,000 pre-sale units will be concentratedly supplied from the second half of 2021 to 2022 in the 3rd New Towns and downtown Seoul. Senior Researcher Yoon said, "It is expected that non-homeowners will flock to fulfill the regional residency period in advance to win the subscription." She added, "With the reduction of circulating jeonse listings and relatively increasing jeonse demand, the upward trend is likely to continue beyond this year into next year."