A House Bought for 450 Million Won 3 Years Ago Now Has a Jeonse Price of 650 Million Won

Jeonse Prices Rise 28% Over Three Years

Apartment complexes in Donam-dong and Dongsomun-dong, Seongbuk-gu, Seoul, where 30-pyeong apartments are being traded at around 900 million won, the average price in the Seoul area.

In recent years, as the price of jeonse (long-term lease) has skyrocketed, there are increasing cases where the current jeonse prices surpass the sale prices from just three years ago. A house that could be purchased for 450 million KRW now requires an additional 200 million KRW just to secure a jeonse lease, let alone buying it outright.

According to KB Real Estate Live On, the nationwide apartment jeonse prices have risen by 27.7% over the past three years since 2018 (from 7.39 million KRW to 9.31 million KRW per 3.3㎡ as of February this year). The current jeonse supply-demand index also stands at 170.4, indicating that even those willing to pay high jeonse deposits find it difficult to find jeonse homes.

Looking at the actual transaction data from the Ministry of Land, Infrastructure and Transport, it is not hard to find complexes where current jeonse prices exceed the sale prices from three years ago.

According to data analyzed by real estate research firm Real House, the 'Eunpyeong New Town Bakseokgogae Hillstate Complex 1' located in Jingwan-dong, Eunpyeong-gu, Seoul, had a jeonse deposit of 620 million KRW (10th floor) in February this year for a 59㎡A-type unit.

The same housing type could be purchased for the mid to high 500 million KRW range just three years ago. In fact, the same unit was sold for 555 million KRW (10th floor) in April 2018.

In Jungang-dong, Seongnam-si, Gyeonggi-do, the 'Jungang-dong Hillstate 2nd Complex' 84㎡ unit was leased for jeonse at 650 million KRW (15th floor) in January. The same unit was sold for 455 million KRW (15th floor) in January 2018. This means that one must pay an additional 200 million KRW over the sale price from three years ago just to secure a jeonse lease.

The SK View apartment with an exclusive area of 84.98㎡ in Sindorim-dong, Guro-gu, Seoul, signed a jeonse contract for 519 million KRW (6th floor) on the 5th of this month. The same-sized unit was sold for 515 million KRW (20th floor) on February 7, 2017. This means the jeonse price has surpassed the sale price from four years ago.

The 97.26㎡ unit at Godeok Raemian Hillstate in Godeok-dong, Gangdong-gu, Seoul, secured a jeonse contract for 787.5 million KRW on the 17th of last month. Around the same time four years ago, a similar-sized unit was sold for 790 million KRW, a comparable amount.

The same trend is observed in provincial areas. The 'Dongdaegu Bando Yubora' 59㎡ unit in Sincheon-dong, Dong-gu, Daegu, had a jeonse contract for 400 million KRW (10th floor) in January this year. Meanwhile, in January 2018, the same unit was traded as a pre-sale right for 341.2 million KRW (10th floor).

This phenomenon is attributed to the relatively steep rise in jeonse prices following the implementation of the new lease law at the end of July last year, which includes the right to request contract renewal and the cap on rent increases. With jeonse prices soaring uncontrollably for years and a shortage of jeonse properties continuing, demand for jeonse is shifting towards purchase demand.

A real estate industry insider said, "As most jeonse listings have been exhausted, some people start looking for jeonse homes six months before their lease expires," adding, "Because it has become so difficult to find jeonse homes, many cases eventually switch to buying."