3000 Households Moving In... Gaepo-dong Becomes the Core of Gangnam Reverse Jeonse

Flood of Jeonse Listings... Worsening Reverse Jeonse Crisis
22% of Gangnam Reverse Jeonse in Gaepo-dong Over the Last 3 Months

[Asia Economy Reporter Kim Hyemin] In Seoul, the decline in jeonse prices is becoming prominent, especially in the Gangnam area where a large volume of new housing is being supplied. There have been cases where transaction prices have dropped by more than 400 million KRW over two years. It is pointed out that the atmosphere of reverse jeonse difficulties, where landlords lower the deposit by hundreds of millions of won but still cannot find tenants, is intensifying.

According to Proptech company Hogangnono on the 27th, a total of 372 reverse jeonse transactions occurred in Gangnam-gu over the recent three months (November 26, 2022 ? January 26, 2023). This means that 372 renewal or new contracts were concluded at prices lower than the average jeonse price during the same period two years ago.

The area with the most reverse jeonse transactions in Gangnam-gu is Gaepo-dong, with 83 cases. This is also confirmed by actual transaction data. According to the Ministry of Land, Infrastructure and Transport’s real transaction price disclosure system, a total of 8 jeonse contracts were signed in the Gaepo Raemian Forest complex (exclusive area 75㎡) in Gaepo-dong over the past three months, of which 6 were lower-priced transactions compared to two years ago. For example, a property on the 3rd floor signed on the 18th was 800 million KRW, which is a 400 million KRW drop from the 1.2 billion KRW contract in December 2020. Similarly, a 60㎡ unit on the 4th floor in Gaepo Jugong Complex 6 in Gaepo-dong was contracted at 350 million KRW last December, down 150 million KRW from 500 million KRW in October 2020.

The sharp drop in jeonse prices is largely due to the flood of supply in the market. With the upcoming move-in of 3,375 households at Gaepo Xi Residence next month, the number of new jeonse listings has surged, affecting nearby jeonse prices as well. According to real estate big data company Apartment Real Transaction Price, as of the 27th, there are 2,494 jeonse listings in Gaepo-dong, Gangnam-gu, which is a 29.4% increase compared to three months ago (1,926 listings). Among these, 1,269 listings are from this complex alone.

The problem is that the volume of move-ins may increase further. In particular, 9,691 households, about 40% of Seoul’s total move-in volume this year, are concentrated in the three Gangnam districts. In August, Raemian One Bailey, with 2,990 households, is scheduled to move in at Banpo-dong, Seocho-gu. In November, 6,702 households will move into The H Firstier I-Park in Gangnam-gu. The reverse jeonse difficulties, where landlords cannot find tenants, may increase, meaning that the jeonse deposit alone may not be enough to cover the deposits of existing tenants.

Yeokyunghee, senior researcher at Real Estate R114, said, "When move-ins concentrate, jeonse listings increase, and nearby jeonse prices are likely to fall further. Coupled with the real estate downturn, the decline is expected to continue, and the reverse jeonse difficulties will likely persist for the time being."