Minimum 11,272 Transactions in February... 1,235 More Than Previous Month
Banpo Xi Exclusive 84㎡ Down 950 Million Won in 9 Months
"Demand for New and Premium Areas... Transactions Expected to Increase for a While"
Last month, the volume of apartment jeonse (long-term lease) transactions in Seoul exceeded 10,000 units for the first time in four months. This is interpreted as a result of the sharp decline in jeonse prices due to the 'conversion of jeonse to monthly rent' phenomenon following last year's interest rate hikes, which increased price competitiveness, coupled with a significant rise in monthly rent prices, leading demand to shift back to jeonse.
According to the Seoul Real Estate Information Plaza on the 13th, the volume of apartment jeonse transactions in Seoul last month was 11,272 units, an increase of 1,235 units compared to the previous month (10,037 units). Since the reporting period (within 30 days) is still ongoing, the final transaction volume is expected to increase further. The jeonse transaction volume exceeding 10,000 units is the first time in four months since October last year. By autonomous district, Gangdong-gu recorded the highest number of jeonse transactions with 1,275 units, followed by Songpa-gu (994 units), Nowon-gu (898 units), Gangnam-gu (825 units), and Gangseo-gu (743 units).
The jeonse supply-demand index is also on the rise. In the first week of March, Seoul's jeonse supply-demand index was 64.0, up 1.6 points from the previous week (62.4). A jeonse supply-demand index above 100 indicates high demand for jeonse, while below 100 indicates high supply.
Until last year, the rise in loan interest rates approaching 7% led to a preference for monthly rent and avoidance of jeonse, causing jeonse prices to fall significantly. As a result, demand is now returning to apartment jeonse, which has become more affordable. In fact, recent transaction prices for large apartment complexes in Seoul show many deals where jeonse prices have dropped by hundreds of millions of won compared to last year. For example, the 84㎡ jeonse at Godeok Gracious in Gangdong-gu was traded at 1 billion won on April 23 last year, but on the 1st of this month, tenants moved in at 450 million won, a decrease of 550 million won. The 84㎡ jeonse at Banpo Xi in Banpo-dong, Seocho-gu, was traded at 2.2 billion won in June last year but was traded at 1.25 billion won this month.
Additionally, the rise in monthly rent demand due to concerns about jeonse fraud has driven up monthly rent prices, reducing the price attractiveness of jeonse. Typically, apartments have a larger gap between jeonse prices and sale prices, making the risk of jeonse fraud lower than in villas. According to an analysis by Real Estate R114 of the Ministry of Land, Infrastructure and Transport's jeonse and monthly rent transaction reports for December last year and January this year, the average monthly rent for a total of 70,510 apartment monthly rent contracts nationwide during this period reached 650,000 won. This is a 24.9% increase compared to the average of 520,000 won (54,490 contracts) during the same period two years ago.
Experts particularly expect the downward trend in jeonse prices in the Gangnam area, where this year's housing supply is concentrated, to continue for the time being. Of the more than 33,000 expected housing units to be supplied in Seoul this year, about 30%, or approximately 13,000 units, will be supplied in the Gangnam area. Accordingly, it is anticipated that jeonse demand to move up to higher-grade areas due to lower jeonse prices will also increase.
Ye Gyeong-hee, Senior Researcher at Real Estate R114, said, "The drop in jeonse prices has been significant, especially in areas with high interest burdens and ongoing housing supply, and there is also a perception that apartments are relatively safe from jeonse fraud, leading to increased demand for jeonse listings. There is demand to move to new or higher-grade areas at lower prices, so jeonse transactions are expected to continue increasing for the time being."
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