What to Do About the Reverse Jeonse Crisis... 'Record-Breaking' Move-In Volume Floods Incheon Next Year

Incheon 'Jipdeuri' Nears 45,000 Households
Additional Decline in Jeonse and Maet Prices May Have Impact
Concerns Over Worsening Reverse Jeonse Crisis and Empty Jeonse Cases

[Asia Economy Reporter Kim Hyemin] Nearly 45,000 households in Incheon alone will move into new homes next year. This is the largest volume since surveys began in 2000. Amid a situation where both sale prices and jeonse (long-term lease) prices are simultaneously falling, this represents an additional worst-case variable. As demand declines and it becomes harder to find tenants, concerns are rising that the issue of 'empty jeonse'?where tenants cannot get their deposit back on time?may worsen next year.

According to Real Estate R114 on the 27th, a total of 352,031 households (including rental units) across 554 complexes nationwide will start moving in next year. This is a 5.8% increase compared to this year’s 332,560 households. The metropolitan area accounts for 179,803 households, while non-metropolitan areas total 172,228 households.

In the metropolitan area, the increase in move-in volume in Incheon stands out. Incheon will see 42,515 households move in this year and 44,984 households next year, marking over 40,000 households for two consecutive years. Notably, next year’s volume is the largest since surveys began in 2000.

The volume of move-ins can affect the jeonse prices in surrounding areas. This is because, in regions without mandatory residence requirements, many owners lease their homes on jeonse to pay the remaining balance for move-in. As a result, a large accumulation of jeonse supply has often led to sharp declines in jeonse prices in those areas.

Incheon’s jeonse prices are already rapidly falling due to the influx of move-ins this year. According to the Korea Real Estate Board, Incheon apartment jeonse prices have dropped 11.9% from the beginning of this year through the second week of December, the second largest decline after Daegu. The preference for monthly rent over jeonse is increasing due to high loan interest burdens, causing supply to accumulate. According to the real estate big data company Apartment Real Transaction Price, jeonse listings have increased by more than 5,000 in six months.

Amid this, concerns are growing that the move-in volume bomb will continue next year, potentially worsening the reverse jeonse crisis and empty jeonse cases. With demand slowing, jeonse prices must be lowered, but if landlords sign new contracts at reduced prices, cases where existing deposits cannot be returned may increase. Yeo Kyung-hee, senior researcher at Real Estate R114, said, "In areas with concentrated move-in volumes, jeonse prices are likely to fall sharply, expanding the reverse jeonse phenomenon."

Move-in delays may also occur. Senior researcher Yeo said, "With apartments from old town redevelopment projects and Geomdan New Town moving in simultaneously, there are concerns about delays in move-ins due to funding issues, such as not being able to sell existing homes or find jeonse tenants," adding, "Cases where new apartment owners cannot pay the remaining balance due to non-return of deposits may increase."

In non-metropolitan areas, Daegu has triggered a red alert with 36,059 households moving in. This is also the largest volume since 2000, with more than half?18,900 households?supplied through redevelopment and reconstruction projects. It is the first time that over 10,000 households from redevelopment projects are supplied in Daegu in a single year. According to the Korea Real Estate Board, Daegu apartment jeonse prices fell 12.4% by mid-month, the largest decline nationwide, indicating a high possibility of further decreases.

Meanwhile, in Seoul, 25% (6,371 households) of the 25,729 households moving in next year are in Gangnam-gu. Especially with the February move-in of Gaepo Xi The Residence (3,375 households), jeonse prices in Gaepo-dong and Daechi-dong are already trending downward. Senior researcher Yeo said, "For those intending to buy or lease next year, it is advisable to pay attention to areas with many new move-ins," adding, "Because urgent sale listings are likely to appear due to the move-in impact, it is necessary to monitor price fluctuations carefully and time transactions accordingly."