[Exclusive] Seoul Apartment Jeonse Ratio Hits Highest in About 2 Years... Overcoming Extinction Theory and Reviving

[Again, Jeonse] October Share 61.12%
Reversed by Monthly Rent Due to High Interest Rates
Returns as Jeonse Prices Fall... "Jeonse Instead of Sale" Demand Also

In October, the proportion of jeonse (long-term lease) in the Seoul apartment rental market rose to its highest level in about two years. Despite the impact of high interest rates and jeonse fraud, jeonse, which had once been overshadowed by monthly rent, has rebounded from the brink of extinction. With jeonse prices and loan interest rates falling, tenants found jeonse more advantageous than monthly rent, and the expectation of falling housing prices led to increased demand for jeonse instead of buying.

A real estate office in an apartment complex in Seoul displays sale and jeonse prices. Photo by Kang Jin-hyung aymsdream@

According to the Seoul Real Estate Information Plaza on the 8th, out of 19,247 apartment lease transactions in Seoul in October, 11,764 were jeonse, accounting for 61.12% of the total. This is the highest figure in 1 year and 11 months since November 2021, when the jeonse proportion was 61.58% (11,850 out of 19,244 transactions).

The jeonse proportion in Seoul apartments reached 68.9% in August 2020, but after the new lease law was implemented, jeonse prices surged, accelerating the 'monthly rent-ification' of jeonse. Especially after last year's US-originated interest rate hikes caused jeonse loan interest rates to soar and large-scale villa jeonse fraud spread, the proportion dropped to 47.62% (11,515 out of 24,181 transactions) in December last year. This was the first time in the Seoul real estate market that jeonse was overtaken by monthly rent. Consequently, some experts raised the 'jeonse extinction theory.'

Seoul Apartment Rental Market Jeonse Ratio Trend

However, the jeonse proportion began to gradually recover as landlords lowered jeonse prices to attract tenants. It surpassed 55% in January this year and recovered to the 60% range in March. The jeonse loan interest rate, which had soared to the 7% range, fell to the 4% range, and demand for villa jeonse shifted relatively safely to small apartments, which also had an impact.

Moreover, with the prevailing expectation of falling housing prices, there is increased standby demand staying in jeonse instead of buying, so the jeonse strength is expected to continue for the time being. In fact, the jeonse proportion for Seoul apartments in November, as currently tallied, is 64% (8,816 out of 13,775 transactions), higher than in October. However, the reporting deadline is until the end of this month.

Park Hapsu, adjunct professor at Konkuk University Graduate School of Real Estate, explained, "During the high interest rate period, monthly rent was cheaper than jeonse loans, so tenants had no choice but to move to semi-jeonse or monthly rent. But now, with loan interest rates and jeonse prices falling, staying in jeonse has become advantageous." He added, "Since jeonse offers significant benefits in terms of reducing housing costs, the basic tendency of tenants to prefer jeonse will continue."