Seoul Apartment Jeonse Index Falls 0.91%
High Interest Rates Increase Jeonse Avoidance
Especially Large Drop in Gangnam Area with Many Move-ins
"The rent deposit for newly built apartments around 20 pyeong in Gaepo has dropped to the 600 million KRW range. It’s tough for landlords, but it’s an opportunity for tenants. Where else can you live in Gangnam at this price? It was unthinkable before."
A representative from real estate agency A in Gaepo-dong, Gangnam-gu, Seoul said, "The rent deposit might rise later, but if you sign now and use the renewal right, you can live for four years at a low price."
Due to high interest rates discouraging jeonse (long-term rent deposit) and a flood of new housing supply, Seoul apartment jeonse prices are sharply falling, especially in the Gangnam area.
According to the Korea Real Estate Board on the 19th, the Seoul apartment jeonse price index fell by 0.91% in the second week of February. Although the decline was smaller than the previous week (-0.95%), the drop remains significant. A Korea Real Estate Board official explained, "Inventory is accumulating mainly in areas with new housing supply, and continuous declines are increasing concerns about reverse jeonse."
In particular, the jeonse price index in the 11 Gangnam districts fell by 1.09%, a steeper decline compared to the 14 Gangbuk districts (-0.71%). The volatility was high in Gangnam-gu (-1.46%) and Dongjak-gu (-1.56%), where many newly built units are entering the market. At the end of this month, Gaepo Xi Residence with 3,375 households will be occupied in Gaepo-dong, Gangnam-gu, and Dongjak-gu is preparing for move-ins at Heukseok River Park Xi with 1,772 households.
A representative from real estate agency B in Heukseok-dong said, "As listings where sellers are rushing to pay the balance are sold out, asking prices for 84㎡ units have risen to the 600 million KRW range, but this is still several hundred million KRW less than what landlords expected one or two years ago."
Along with the surge of new supply, jeonse prices for nearby older apartments are also falling. The 85㎡ jeonse at Raemian BlessTige in Gaepo-dong, Gangnam-gu was renewed on the 7th for 1.05 billion KRW. This unit had a jeonse contract for 1.6 billion KRW in November 2022. The jeonse deposit has thus dropped by 550 million KRW in two years. Similarly, the 85㎡ unit at Gaepo Raemian Forest saw its deposit reduced from 1.3 billion KRW in October 2020 to 1 billion KRW at the recent renewal.
Yoon Ji-hae, senior researcher at Real Estate R114, said, "As high interest rates continue, the burden of jeonse prices is increasing, causing jeonse demand to shift to monthly rent. Especially in areas with many new units where it is difficult to find tenants, the possibility of reverse jeonse is growing, which could lead to issues with returning jeonse deposits."
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