"Seoul Faces Jeonse Crisis Now"…10 Tenants Line Up at Apartment in Gangseo-gu

Prospective Tenants Lining Up to Find Jeonse Listings
"Contractors Chosen by Drawing Lots"
Seoul Jeonse Market Imbalance Worsens Day by Day
"Jeonse Price Surge May Continue Until Next Year"

A competition to become a tenant took place at a Jugong apartment in Gayang-dong, Gangseo-gu, Seoul. (Photo by Online Community)

[Asia Economy Reporter Onyu Lim] #In the hallway of A Jugong Apartment in Gayang-dong, Gangseo-gu, Seoul, about 10 people are lined up. They are 'prospective tenants' looking to view rental houses on the market. A representative from a real estate agency (hereafter, agent) in Gayang-dong said, "Only those who could match the landlord's schedule came, and yet this many showed up." This scene vividly illustrates the worsening 'Jeonse crisis' in Seoul.

According to the real estate industry on the 14th, as the Jeonse shortage in Seoul intensifies, tenants are competing fiercely to secure listings. The methods to select winners vary widely. There are first-come-first-served cases, landlords conducting tenant interviews directly, and even cases decided by drawing lots.

In fact, Apartment A selected tenants by drawing lots. A total of nine teams participated in the lottery, and the team that won on that day immediately signed the Jeonse contract. This news was revealed when a netizen posted a photo taken at the time on an online community, saying, "My family went to see a Jeonse house here but was rejected." The netizen added, "Even though I heard Jeonse availability is scarce these days, I didn’t expect it to be this bad. It must be really tough for those preparing to move."

Built in 1993, this complex consists of about 1,000 households with small units ranging from 34 to 50 square meters (exclusive area). Recently, as the Jeonse shortage in Seoul has worsened, Jeonse prices have risen by tens of millions of won within a few months. The Jeonse price for a 50㎡ unit, which was 290 million won at the beginning of this year, rose to 335 million won at the beginning of this month.

Since the new lease protection laws, including the right to request contract renewal and the rent ceiling system, were implemented at the end of July, instability in the Seoul Jeonse market has been increasing daily. According to the Korea Real Estate Board, Seoul apartment Jeonse prices have risen for 67 consecutive weeks as of last week.

After the government announced supply measures for the metropolitan area, Jeonse demand, including those waiting for subscription, has accumulated, but due to the new lease law and regulations on actual residence related to reconstruction move-in rights and capital gains tax exemptions, Jeonse supply is drying up. There are even 'Jeonse zero complexes' with zero Jeonse listings. The imbalance between supply and demand can also be seen in the KB Kookmin Bank Seoul Jeonse Supply-Demand Index. Last week, this index recorded 192, approaching the all-time high (196.9) in September 2013 when the Jeonse crisis erupted. This index ranges from 0 to 200, with values above 100 indicating a shortage of supply.

Yoon Ji-hae, senior researcher at Real Estate 114, said, "This fall, due to the shortage of Jeonse listings, the recent upward trend is likely to continue for some time, and an increase in Jeonse prices is expected." She added, "As the circulating Jeonse listings decrease while Jeonse demand relatively increases, the upward trend is likely to continue beyond this year into next year."