[Again, Jeonse] "Seoul Move-in Supply Lowest in 43 Years"... Will Jeonse Prices Fluctuate Again?

2024 Seoul Apartment Move-in Volume 11,000 Units
"Supply Shortage Causes Sales Demand to Wait, Leading to Jeonse Price Fluctuations"
Some Analysts Suggest Jeonse Prices May Reach Peak

Experts express concerns that the Seoul apartment jeonse (long-term lease) market, which has experienced wild fluctuations over the past three years, could once again be shaken next year. With forecasts predicting that the number of move-in units will hit the lowest level in decades, some analysts believe that jeonse prices could reach the 2021 peak set after the new lease law was enacted.

Seoul's Move-in Cliff Next Year... "Lowest Level in 43 Years Since 1981"

According to Zigbang on the 8th, the number of apartment move-in units in Seoul for December is zero. Furthermore, next year is expected to be at a move-in cliff level. The total is projected to be 11,367 units, which is less than half of this year's 30,470 units. This corresponds to the lowest level in 43 years since 8,288 units in 1981.

Real Estate R114 also presented a similar outlook. They expect the number of scheduled move-in units next year to be 10,921, marking the lowest level since surveys began in 2000.

This move-in gap is likely to fuel the rising trend of Seoul apartment jeonse prices, which have increased for 28 consecutive weeks since the fourth week of May. Ham Young-jin, head of Zigbang Big Data Lab, explained, "With a shortage of apartment supply and the rarity of new constructions, the upward trend in jeonse prices is likely to continue for the time being." He added, "The shift from purchase demand to jeonse demand is already pushing prices up, which could further accelerate price increases."

Park Hap-soo, adjunct professor at Konkuk University Graduate School of Real Estate, also said, "Next year's move-in volume in Seoul is the lowest since the 2000s, making it difficult to even predict the extent of its impact on the jeonse market." He added, "During the supply gap a decade ago, Seoul's jeonse rate rose to 85%, and that situation could be repeated." He expressed concern, saying, "If jeonse prices rise, the lives of lower-income groups will become even more difficult."

View of downtown Seoul from Namsan [Image source=Yonhap News]

How Much Will Jeonse Prices Rise? 3-5% vs. Over 5%... "Difficult to Predict"

However, experts have differing opinions regarding the extent of jeonse price increases next year. Lab head Ham expects Seoul apartment jeonse prices to rise within 5% next year. He explained, "If jeonse prices rise too much, demand will shift to outskirts like Gyeonggi and Incheon," adding, "Since the number of move-in units in Gyeonggi and Incheon is not insignificant, Seoul jeonse prices are expected to rise within 3-5%."

There is also a view that jeonse prices could reach the high points set after the new lease law. Yoon Ji-hae, research team leader at Real Estate R114, said, "A cumulative increase of over 5% is expected," adding, "Especially in Gangnam and areas with many actual users like Nowon and Gangseo, jeonse prices could recover to their peak."

Experts point out that managing jeonse prices is necessary because they affect not only housing stability for ordinary citizens but also the sales market. Yoon said, "With the downward trend in housing prices, it will be difficult for jeonse prices to push up sales prices until the first half of next year," but added, "In the second half of next year, it could become a destabilizing factor for the sales market."

Professor Park also predicted, "If interest rates fall and the economic downturn experiences a soft landing, the rise in jeonse prices due to a sharp decrease in move-in units could raise sales prices." He added, "Since it is physically difficult to increase move-in units, revitalizing reconstruction and redevelopment and accelerating the promotion of the 3rd New Town projects are necessary to stabilize participants' sentiment."