25-Pyeong Homes on Seoul Outskirts Reach 1 Billion Won... Unstoppable 'Panic Buying'

Geumcheon-gu Geumcheon Lotte Castle Gold Park 1st 59㎡ Near 1 Billion KRW
Gangseo Gayang-dong, Seongbuk Gireum New Town 59㎡ Surpasses 1 Billion KRW
New Lease Law Sparks Jeonse Crisis, Fuels Apartment Price Surge

Seoul Apartment View / Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Onyu Lim] Due to the "panic buying" triggered by the Jeonse crisis, even the prices of small apartments around 25 pyeong in the outskirts of Seoul are surpassing the 1 billion KRW mark. Although the government has announced a large-scale Jeonse housing supply plan amounting to 114,000 households over the next two years, market anxiety appears to be expanding instead.

According to the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system on the 25th, a 59㎡ (exclusive area) apartment in Geumcheon Lotte Castle Gold Park 1st Complex, Doksan-dong, Geumcheon-gu, Seoul, was traded for 973 million KRW on the 3rd of this month. The 59㎡ size corresponds to approximately 25 pyeong in general supply area standards and is a small apartment mainly demanded by 2-3 person households. In the first half of the year, this apartment was mostly traded in the 800 million KRW range, but after surpassing 900 million KRW in August, the actual transaction price has now surged close to 1 billion KRW.

In the Gangseo-gu area, cases of apartments of the same size exceeding 1 billion KRW in actual transaction prices are also occurring one after another. A 59㎡ apartment in Gangseo Hangang Xi, Gayang-dong, was traded for 1.06 billion KRW on the 15th of last month, and Gangseo Hillstate in Hwagok-dong was traded for 1.055 billion KRW on the 9th of last month. A 59㎡ apartment in Hanwha Dream Green 1st Complex in Yeomchang-dong recorded an actual transaction price of 979 million KRW on the 24th of last month, and the asking price has already soared to the 1.1 billion KRW range.

Small apartment sale prices are also soaring in areas with good access to downtown or Gangnam areas, such as Gireum New Town in Seongbuk-gu and Sindorim-dong in Guro-gu. A 59㎡ apartment in Raemian, Gireum New Town 8th Complex, was contracted for 1 billion KRW for the first time in Seongbuk-gu on the 19th of last month, and a 60㎡ apartment in Dong-A 3rd Complex, Sindorim, was traded for 975 million KRW earlier this month, with the current asking price rising to as high as 1.15 billion KRW.

The direct cause of the steep rise in small apartment prices in the outskirts is attributed to the Jeonse crisis caused by the "Lease 2 Laws," including the right to request contract renewal and the Jeonse/monthly rent ceiling system. As Jeonse listings sharply decreased in the market, Jeonse prices for small apartments in Seoul city surged by hundreds of millions of KRW within just three months, prompting tenants to rush into home purchases. A representative from real estate agency A in Doksan-dong said, "Prices are rising as young people in their 30s flock to large new apartment complexes," adding, "Due to growing anxiety over soaring Jeonse prices, there is a mood to buy homes even by taking out loans." Additionally, 'gap investment' exploiting the reduced price gap between sale and Jeonse prices is fueling the rise in small apartment prices.

In fact, last month, Seoul apartment transactions rebounded to 4,187 cases after three months, and listings in the outskirts are rapidly being depleted. According to Apartment Real Transaction Price, a real estate big data company, the districts with the highest rate of listing decrease in Seoul over the past month were Gangseo-gu (-5.8%) and Geumcheon-gu (-2.5%). Ham Young-jin, head of the Zigbang Big Data Lab, analyzed, "There is an underlying anxiety that Jeonse prices will rise further due to fewer new housing units next year compared to this year, and as housing prices maintain a strong stable trend, people are buying apartments in the outskirts out of unease."

The increased difficulty of winning new housing lotteries is also considered a factor driving up small apartment prices. Experts analyze that young people with few dependents or short periods of being homeless are inevitably pushed into the general sales market.

This is also confirmed by the Housing Price Outlook Consumer Sentiment Index (CSI) released by the Bank of Korea on the 24th, where the index for the 20s and 30s age group was 136, higher than the average of 130. Lab head Ham predicted, "With the continuation of the low interest rate trend and the inflow of abundant idle funds, the strong demand for small and medium-sized apartments by young buyers is unlikely to subside for the time being."