New Lease Law Shock... Seoul Jeonse Prices Change by Hundreds of Millions in Just 5 Months

Average Jeonse Price of Apartments South of Seoul Han River Surpasses 700 Million KRW
Five Months After Entering 600 Million KRW Range... Usually Takes Years for Leading Digit to Change
Average Jeonse Price of Apartments North of Seoul Han River Also Approaching 500 Million KRW

[Image source=Yonhap News]

[Asia Economy Reporter Onyu Lim] In February, the average jeonse price for apartments south of the Han River in Seoul surpassed 700 million KRW. This occurred just five months after entering the 600 million KRW range. Considering that it usually takes several years for the leading digit of the average jeonse price to change, the rapid surge following the implementation of the new Housing Lease Protection Act, including the contract renewal request system and the rent ceiling system, is being described as a 'shock level' increase.

According to KB Real Estate's monthly housing trend report on the 3rd, the average jeonse price for apartments in 11 districts south of the Han River, including Gangnam, Seocho, and Songpa districts, recorded 700.16 million KRW last month. Just five months ago, in September last year, the jeonse price entered the 600 million KRW range, then exceeded 650 million KRW in November, and last month broke through the 700 million KRW barrier for the first time. Previously, it took 3 years and 1 month for the average jeonse price to rise from the 500 million KRW range (August 2017) to the 600 million KRW range (September 2020). However, with the steep rise in jeonse prices, the time taken for the leading digit to change has drastically shortened.

The average jeonse price increase for apartments in 14 districts north of the Han River is also fierce. As of last month, it stood at 482.39 million KRW, just shy of 500 million KRW. Since entering the 400 million KRW range in July last year, it has risen nearly 20% in seven months. Considering it took 4 years and 8 months to move from the 300 million KRW range (November 2015) to the 400 million KRW range (July 2020), this is a significant burden for tenants.

The sharp rise in Seoul's jeonse prices is largely due to the Lease Protection Act implemented at the end of July last year. Existing tenants exercised their contract renewal rights, making jeonse listings scarce, which ultimately caused jeonse prices to skyrocket. An unstable situation persisted where new contracts continuously set record-high prices.

Moreover, the area south of the Han River includes the Gangnam 3 districts?Gangnam, Seocho, and Songpa?which have excellent school districts and locations, leading to a pronounced rise in jeonse prices. For example, the actual transaction price for an 84.98㎡ (exclusive area) jeonse at Raemian Daechi Palace Complex 1 in Daechi-dong, Gangnam-gu, soared from 1.53 billion KRW in May last year to 2.04 billion KRW in December last year. In Seocho-gu, the 84.98㎡ unit at Acro River Park in Banpo-dong rose from 1.55 billion KRW in July last year to 1.9 billion KRW in January this year.

At least since the new year, the jeonse shortage has eased somewhat, and listings have begun to accumulate. According to Apartment Real Transaction Price, a real estate big data company, jeonse listings for Seoul apartments increased by 28.4% to 21,944 units compared to 17,085 units two months ago. However, sporadic record-high transactions are still occurring, and there is a possibility that the jeonse shortage will worsen again as demand increases during the spring moving season after the off-season. Ham Young-jin, head of the Zigbang Big Data Lab, said, "With the continued decrease in new move-in volumes from March to May, it may become difficult to find jeonse listings during the spring moving season when tenant activity increases."