[2024 Real Estate Outlook] Decreasing Move-in Volume and Villa Avoidance... Fueling Seoul Jeonse Price Increase

Experts predict that rental prices in the lease market will rise by up to 4% or more this year, centered around Seoul. The main factors cited include a decrease in housing supply, loan interest rates and regulations, and the aversion to villas (row houses and multi-family housing).

View of downtown apartments from Namsan, Seoul / Photo by Yonhap News

Ham Young-jin, Head of the Zigbang Big Data Lab, stated, "In the metropolitan area, jeonse prices will slightly increase or remain stable as purchase demand shifts to rental demand. Especially in Seoul, the number of apartment move-ins this year is estimated to be around 10,000 units, which is less than usual, so the upward trend in jeonse prices may continue."

According to Zigbang, the total number of apartment move-ins nationwide this year is 306,361 units, a 4.6% decrease compared to last year (321,252 units). Among these, Seoul is expected to have 12,334 units moving in, which is about 59% less than last year (30,470 units), raising concerns that this could ignite a rise in jeonse prices. In fact, unlike the weakening apartment sale prices, jeonse prices continue to rise. According to the Korea Real Estate Board, prices have increased for 23 consecutive weeks nationwide, and in Seoul, the upward trend has lasted for as many as 32 weeks.

Park Won-gap, Senior Real Estate Specialist at KB Kookmin Bank, predicted a rise in jeonse prices this year, saying, "The volume of move-ins and interest rates will affect jeonse prices." This is because jeonse loans often have variable interest rates and are sensitive to rate adjustments, and the volume of move-ins affects jeonse prices more than sales prices.

There was also a viewpoint that whether the Debt Service Ratio (DSR) applies to jeonse loans is important. Currently, jeonse loans and apartment interim payment loans are exempt from DSR regulations, but with the implementation of the 'Stress DSR' system starting this year, it is highly likely they will be included in the future. Structural factors were also mentioned. Kim Kyu-jung, Head of the Asset Succession Research Institute at Korea Investment & Securities, predicted, "Due to structural risks in the lease market such as reverse jeonse and jeonse fraud, Seoul apartment jeonse prices will partially rise," assuming that villa demanders will massively move to apartments.

Opinions on the rate of jeonse price increase varied, but a minimum annual increase of 1% or more was predicted. Doo Sung-gyu, Director of the Mokmin Economic Policy Research Institute, and Lee Chang-moo, Professor of Urban Engineering at Hanyang University, forecast an increase of over 4% annually.

On the other hand, the outlook for local areas was mostly that jeonse prices would either decline or remain stable. Yoon Ji-hae, Senior Researcher at Real Estate R114, said, "In regions such as Gyeongbuk and Gyeongnam, where the number of move-ins is increasing compared to last year, the rise in jeonse prices will be limited."

Lab Head Ham also analyzed, "In local areas, where unsold housing is accumulating, the number of move-ins this year is expected to increase by more than 10,000 units to around 160,000 units compared to last year, so the factors causing jeonse price instability will be relatively less."