The Gap Between New and Renewal Jeonse Prices in Seoul Narrows... 60% of New Transactions Are Price Drops

Real Estate R114 Analyzes 4,200 Seoul Apartment Jeonse Transactions
New vs. Renewal Gap Narrows from 160 Million to 110 Million Won

[Asia Economy Reporter Kim Hyemin] This year, the gap in deposit amounts between new and renewal jeonse contracts for Seoul apartments has narrowed compared to last year. Among new jeonse transactions, 6 out of 10 were lower than the average, indicating a decline in prices.

According to Real Estate R114 on the 1st, an analysis of 4,200 cases where new or renewal jeonse contracts were signed at least once within the same complex and same area from June last year to November this year revealed these results.

The survey showed that the average jeonse price this year was 538.67 million KRW for renewals and 649.83 million KRW for new contracts, with a gap of 111.16 million KRW. Last year, the prices were 504.58 million KRW and 672.47 million KRW respectively, with a gap of 167.89 million KRW between new and renewal contracts. The gap decreased by 56.73 million KRW over one year.

New contracts, which are made according to market prices, are generally traded at higher prices than renewal contracts, which have restrictions on rent increases due to the use of renewal rights. However, as the jeonse market began to decline this year, the gap narrowed. In fact, due to interest rate hikes and other factors, new contract prices fell, while the average price of renewal contracts rose, reducing the gap.

Among new jeonse contracts made this year, 2,538 cases were lower than last year’s average jeonse price. This means 6 out of 10 transactions were at decreased prices. On the other hand, for renewal contracts, 944 cases (22.5%) were lower than last year’s prices.

Ye Kyung-hee, senior researcher at Real Estate R114, said, "Due to the increased burden of jeonse loan interest from interest rate hikes, concerns about reverse jeonse, and continued conversion to monthly rent, along with a sharp drop in jeonse demand caused by the use of renewal rights, the decline in new contract jeonse prices is likely to continue for some time. As the gap between new and renewal contracts narrows, controversies over the multiple jeonse price phenomenon that arose after the introduction of the Lease Protection Act are expected to subside."