Comprehensive Survey of 23 Metropolitan Area Complexes with Over 500 Households
17 Complexes Have Jeonse Prices Set Higher Than Sale Prices
Jeonse Price Surpassing Sale Price from Seoul Spreads Across the Metropolitan Area
[Asia Economy Reporter Onyu Lim] Hanam Powell City in Gami-dong, Hanam, Gyeonggi Province, which will begin occupancy next month (892 households), has jeonse (long-term lease) listings for 84㎡ (exclusive area) starting from a minimum of 600 million KRW to a maximum of 700 million KRW. The sale price for this area is up to 572 million KRW. The minimum jeonse price is therefore 28 million KRW higher than the highest sale price. Although there are listings at 500 million KRW, these are considered 'abnormal properties.' A representative from Hanam A Real Estate Agency explained, "There are jeonse listings with a deposit of 500 million KRW, but these are abnormal properties with a contract condition of less than one year by the owner," adding, "Excluding these, the minimum jeonse price is 600 million KRW." Ultimately, this means that homeowners in this complex can recover the sale price just by leasing out the property on a jeonse basis.
Since the implementation of the new Lease Protection Act, the jeonse crisis originating in Seoul has spread to Gyeonggi and Incheon, causing a phenomenon across the metropolitan area where jeonse prices exceed sale prices. On the 18th, Asia Economy surveyed 23 apartment complexes with 500 or more households scheduled for occupancy in the fourth quarter from October to December in the Seoul, Gyeonggi, and Incheon metropolitan areas, focusing on 84㎡ units. The results showed that in 17 complexes, accounting for 73%, jeonse prices were higher than sale prices. In the survey, jeonse prices were compared using median market prices, while sale prices were compared using the highest prices.
In particular, in 10 complexes, even the cheapest jeonse listings already exceed the sale prices and are priced even higher. In Seoul, for example, the 84㎡ unit at Hillstate Classian in Shingil New Town, Yeongdeungpo-gu, had a highest sale price of 729.9 million KRW at the time of general sale, but the current lowest jeonse listing is priced at 730 million KRW. Similarly, in Sangye-dong, Nowon-gu, the lowest jeonse market price for the same area has surpassed the sale price.
In the Gyeonggi area, this phenomenon has been observed in ▲ Hwaseong Dongtan 2 District A84 Block ▲ Gwangmyeong Gwangmyeong Eco Xi Weave ▲ Hanam Hanam Powell City ▲ Ansan ePyeonhansesang Seonbu Plaza ▲ Goyang Jichuk Jungheung S Class ▲ Siheung Eungye District S4 Block. In Incheon, the lowest jeonse prices for 84㎡ units at Incheon The Sharp Sky Tower 8-5 Block in Michuhol-gu and Bupyeong Kolon Haneulchae in Bupyeong-gu have also exceeded sale prices.
Experts analyze that since the implementation of the new Lease Protection Act at the end of July, including the jeonse and monthly rent cap system and the contract renewal request right, the shortage of jeonse listings has intensified, causing the jeonse price-sale price reversal phenomenon centered in Seoul to spread to Gyeonggi and Incheon.
The place where jeonse prices exceeded sale prices the most was Gwangmyeong Eco Xi Weave. In this complex, the cheapest jeonse listing was 600 million KRW, which is 46 million KRW higher than the sale price of 554 million KRW. The most expensive jeonse listing was 750 million KRW, about 200 million KRW higher than the sale price. In Gwangmyeong, redevelopment of Gwangmyeong-dong New Town and reconstruction of Cheolsan-dong are progressing simultaneously, and as several areas are entering relocation stages, jeonse demand has recently surged.
Some expect that the reversal of jeonse prices over sale prices may increase investment in pre-sale rights. This is because the risk of investing in pre-sale rights has effectively become 'zero' due to the combination of the private land sale price ceiling system and the rapid rise in jeonse prices. Although the government has effectively classified short-term pre-sale rights investment as speculation, the Lease Protection Act and sale price controls seem to have encouraged investment instead. A real estate consulting industry official said, "The key to investing in pre-sale rights is to cover the gap between sale prices and jeonse prices, and with the rise in jeonse prices, it has become possible to hold pre-sale rights stably."
Concerns are rising that the Seoul-originated metropolitan area jeonse crisis will worsen as the supply of new apartments in Seoul sharply decreases next year. Jang Jaehyun, head of Real Today, said, "Due to the implementation of the Lease Protection Act and the 'two-year actual residence' requirement for capital gains tax exemption, the supply of jeonse in the metropolitan area is far below demand," adding, "The effect of getting cheap jeonse during occupancy of large complexes is a thing of the past."
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