Seoul Apartment Jeonse Prices Fall 0.75%... Largest Drop on Record

[Image source=Yonhap News]

[Asia Economy Reporter Ryu Taemin] The steep decline in housing prices combined with the trend of rising interest rates has led to a sharp drop in Seoul apartment jeonse prices.

According to the weekly KB Housing Market Trend data released by KB Real Estate, Seoul apartment jeonse prices fell by 0.75% in the third week of November. This is the largest decline since the statistics were first compiled in April 2008. By district, Jung-gu showed the largest drop at -2.04%, followed by significant declines in Eunpyeong-gu (-1.33%), Gwangjin-gu (-1.24%), Seocho-gu (-1.22%), and Dongdaemun-gu (-1.19%).

The decline in Seoul apartment jeonse prices is also confirmed by other statistics. According to the Korea Real Estate Board's weekly apartment price trend survey, the change rate of Seoul apartment jeonse prices in the third week of November was -0.73%, marking the largest drop since the statistics began in May 2012.

This is interpreted as the effect of consecutive interest rate hikes. As loan interest rates rise, the burden of financing jeonse deposits increases, causing jeonse demand to plummet while the supply of listings has worsened, explained the Korea Real Estate Board. As a result, downward price pressure has increased, leading to a larger decline compared to the previous week. In fact, the Seoul apartment jeonse supply-demand index this week also fell below the 70 mark to 68.5, down 2.1 points from 70.6 last week.

Other metropolitan areas outside Seoul also saw significant declines. According to KB statistics, apartment jeonse prices in Gyeonggi Province fell by 0.84% compared to the previous week, and Incheon dropped by 0.85%. The overall metropolitan area recorded a -0.81% change.

Meanwhile, except for Incheon, the five metropolitan cities (-0.42%) all showed declines: Ulsan (-0.32%), Daejeon (-0.34%), Gwangju (-0.41%), Busan (-0.42%), and Daegu (-0.51%). Jeonse prices in other regions outside metropolitan cities (-0.25%) also fell in Gangwon (-0.08%), Chungbuk (-0.09%), Gyeongbuk (-0.13%), Jeonnam (-0.19%), Jeonbuk (-0.25%), Chungnam (-0.29%), Gyeongnam (-0.40%), and Sejong (-0.73%).