As Seoul apartment jeonse prices continue to decline, warnings are growing louder that the jeonse-to-sale price ratio (the ratio of jeonse price to sale price) is on the verge of breaking below 50%. Despite the easing of real estate regulations last month, including the lifting of restrictions in regulated areas, the environment for gap investment?buying homes with jeonse deposits?has worsened further. With a large volume of move-ins scheduled for next month, additional jeonse price drops in some complexes seem inevitable.
According to KB Kookmin Bank, as of February this year, the jeonse-to-sale price ratio for Seoul apartments was 51.2%, marking a decline for three consecutive months since November last year (53.9%). By district, Gangnam-gu recorded the lowest ratio among Seoul’s 25 districts at 42.5%. Not only Gangnam-gu but also popular areas such as Yongsan-gu (43.2%), Songpa-gu (45.3%), and Seocho-gu (45.9%) saw their jeonse-to-sale price ratios fall below 50%.
In Seoul, areas with relatively higher jeonse-to-sale price ratios were in the northern part of the city. Jungnang-gu (59.1%), Seongbuk-gu (57.3%), Geumcheon-gu (56.9%), and Eunpyeong-gu (56.2%) all had ratios exceeding 50%. There was no area with a ratio above 60%.
In fact, jeonse prices in large apartment complexes in Seoul that are about to have move-ins or are currently moving in have dropped by hundreds of millions of won. For example, as of the 26th, jeonse listings for 59㎡ units in Gaepo Xi The Residence in Gangnam-gu, Seoul, which began move-ins last month, include some priced in the 500 million won range for lower floors. At the end of last year, the jeonse asking price for the same unit size was around 1.3 billion won, meaning it has fallen to about half.
The nationwide trend is similar. As of February, the nationwide apartment jeonse-to-sale price ratio was 66%, down 1.8 percentage points from 67.8% in November last year.
The continued decline in the jeonse-to-sale price ratio is due to a larger drop in jeonse prices compared to sale prices recently. According to KB’s survey, Seoul apartment prices fell by 2.96% last year, while jeonse prices dropped by 5.45%. On a monthly basis, the average nationwide apartment jeonse price in February was 297.82 million won, down 8.13 million won from the previous month (305.95 million won). During the same period, the average jeonse price for Seoul apartments also fell by 17.34 million won from the previous month to 592.97 million won. In December last year, Seoul’s jeonse price was 636.94 million won. In other words, gap investment?buying homes with jeonse deposits?now requires more initial capital than last year.
The downward trend in jeonse prices is expected to continue for the time being. According to data from Real Estate R114, 41 complexes with a total of 26,665 households (including rental units) are scheduled to begin move-ins nationwide next month. This is the largest volume for April since 2018 (29,841 households). In particular, rental units account for 7,875 households (29.5%), the highest number this year.
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