The Counterattack on Controlling Housing Prices... Upcoming Apartment Complexes' Jeonse Also in High Demand

Leasehold Act 2, Strengthened Residency Requirements Erase Large Complex Move-in Effect
"Usually Cheaper Than New Move-in Jeonse Prices, But Now a Completely Different Atmosphere"
Jangwuidong Kkumuisup I-Park Agent "Less Than 100 Jeonse Units Out of 1,700"
Sanggye-dong Forena Nowon 84㎡ Jeonse Prices Starting from 680 Million Won

[Asia Economy Reporters Onyu Lim, Chunhee Lee] "Cheap jeonse is now a thing of the past. It’s actually more expensive than nearby apartments." (Representative of Real Estate Agency A in Jangwi-dong, Seoul)

The effect of large complex move-ins has disappeared from the jeonse and monthly rent market. Usually, large complexes about to move in offer jeonse and monthly rent listings cheaper than market prices, but due to the Lease Protection Act (including the Contract Renewal Request System and Jeonse Price Cap System) and the strengthening of actual residence requirements for capital gains tax exemption, listings have become scarce, causing prices of available listings to exceed surrounding market prices.

According to Asia Economy’s on-site coverage on the 8th, the jeonse price for an 84㎡ (exclusive area) unit at Kkumuisup I-Park in Jangwi-dong, Seongbuk-gu, Seoul, which is scheduled to move in at the end of December, is formed at a maximum of 780 million KRW. Even the relatively affordable lower floors are at least 650 million KRW. This far exceeds the jeonse market price of 630 million to 650 million KRW for the nearby Raemian Jangwi First High, which moved in last September. Considering that it is a large complex with 1,703 households and that jeonse listings usually flood the market 2 to 3 months before move-in, this is an unusual phenomenon.

Construction site of Dream Forest I-Park in Jangwi-dong, Seongbuk-gu, Seoul, with move-in scheduled for the end of December

Foretna Nowon in Sanggye-dong, Nowon-gu, which welcomes residents in early December (1,062 households), shows a similar trend. Currently, the jeonse price for an 84㎡ unit in this complex is around 680 million to 800 million KRW. Although it is difficult to make a direct comparison due to the absence of recently built large complexes in the area, the price is noticeably higher than that of Junggye Central Park (457 households), which is in its fifth year since move-in. The recent actual transaction price for a similar-sized unit in Junggye Central Park was 550 million KRW as of August.

Typically, when new apartments move in, jeonse prices are set 100 million to 200 million KRW lower than surrounding market prices. This is because landlords compete to find tenants who will pay the jeonse deposit. Just before the final payment date, jeonse prices sometimes dropped by hundreds of millions of KRW. However, this year, that convention seems to be breaking down.

Real estate agents in Jangwi and Sanggye-dong cite the implementation of the Lease Protection Act as the main reason for the abnormal phenomenon where jeonse prices in move-in complexes are higher than market prices. A representative from Real Estate Agency B in Sanggye-dong said, "If landlords list their properties cheaply now, they will have to accept low prices again two years later unless tenants change, so landlords want to rent at market price from the start."

The volume of listings is also different from before. A representative from Real Estate Agency C in Jangwi-dong said, "Due to the Lease Protection Act and the strengthening of actual residence requirements for capital gains tax exemption, the proportion of landlords moving in themselves has increased," adding, "With jeonse shortages across Seoul, many people are lined up to move in, but supply is insufficient, so prices inevitably rise." According to nearby real estate offices, the number of jeonse listings at Kkumuisup I-Park in Jangwi-dong is less than 100 units.

Jang Jaehyun, head of Real Today, diagnosed, "Jeonse supply across Seoul falls far short of demand, and in Gangbuk, there are many actual buyers wanting to move into new complexes," adding, "It will be difficult to expect the effect of low-priced jeonse due to large complex move-ins for the time being."