Seoul Jeonse 'Out of Stock'... "Despite Soaring House Prices, Let's Extend Contracts First" [Impact of the Two Lease Laws]

Seocho, Seongdong, Nowon, Geumcheon Major Apartment Complex Report
Finding Jeonse Listings Across Seoul 'Like Catching Stars in the Sky'

Supply Shortage and Apartment Concentration Plus
Lease 2 Act Fuels Jeonse Price Increase

"Even After 4 Years of Jeonse Term, Extensions Start"
"No Turnover in Listings, So No Jeonse Listings Available"

Banpo Xi Complex located in Banpo-dong, Seocho-gu, Seoul.
Photo by Seungwook Park

"Among the major complexes in Banpo-dong, are there any jeonse (long-term lease) units available for move-in during August and September? Based on the exclusive area of 84㎡, there is one unit at 'Banpo Xi', one at 'Banpo Riche', and two at 'Banpo Summit'. So, about four in total. These days, when it's hard to find listings, existing tenants tend to renew their contracts without hesitation. Tenants who have completed two years use their right to renew the contract, and those who have completed four years extend it further. That's why listings have completely dried up." (Representative of a real estate agency near Banpo Xi, Banpo-dong, Seocho-gu, Seoul, on the 30th)

There is a 'shortage phenomenon' of jeonse listings for apartments in the Seoul area. According to 'Asil', a real estate big data company, as of the 1st, the number of jeonse listings for Seoul apartments (as of the 30th of last month) has decreased by more than 20% compared to the beginning of this year. The number of contracts has also declined. According to the Seoul Real Estate Information Plaza, the number of jeonse contracts for Seoul apartments has dropped by more than 30% as of June compared to January this year.

Due to the shortage of housing supply, jeonse apartments in Seoul have become highly sought after. The volume of move-ins in Seoul during the first half of this year (5,850 units) is less than half of that in the first half of last year (15,080 units), causing jeonse prices to soar. The Seoul apartment jeonse price index has been rising for one year and two months.

In particular, the two lease laws enacted on July 31, 2020, four years ago, have added fuel to the fire. The units that were newly contracted at that time are now being renewed, pushing jeonse prices even higher. After the jeonse fraud incidents, demand shifted from non-apartment housing to small apartments in Seoul, further driving up jeonse prices.

Banpo Xi Jeonse Prices Rise by 500 Million KRW in Half a Year

The representative of a real estate agency near 'Banpo Xi' in Banpo-dong, Seocho-gu, said, "Although it has not yet been reflected in the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system, a jeonse contract for an 84㎡ unit in the commercial building closest to Line 7 was recently signed at 1.85 billion KRW." This is a 500 million KRW increase from January's 1.35 billion KRW. When the two lease laws were enacted four years ago and jeonse prices hit record highs, the peak price for this complex was around 2 billion KRW.

Another nearby real estate agency manager said, "Last year, even if we listed units at 1.3 billion KRW, they wouldn't sell, but the atmosphere has completely changed this year," and predicted, "With contracts being made at 1.85 billion KRW in the commercial building, jeonse asking prices will likely rise to around 1.7 billion KRW even for non-commercial buildings."

On the same day, at 'Tens Hill' in Hwangsimni-dong, Seongdong-gu, there were only three jeonse listings available for move-in within two months based on an exclusive area of 84㎡. The representative of a nearby real estate agency said, "Even after completing a four-year contract, units at Tens Hill rarely become available. Some tenants even stay for up to eight years," adding, "These days, there are more units for sale than for jeonse, making it difficult to find jeonse listings." A jeonse contract for an 84㎡ unit was signed at 950 million KRW earlier this month, up 150 million KRW from January. Asking prices have risen to as high as 1.03 billion KRW.

A prospective tenant looking at listings there said, "I'm trying to find a jeonse house before it's too late," and added, "If sales prices rise to a certain level and then stabilize, people who were hesitating to buy will turn to jeonse. That will increase jeonse demand even more, causing jeonse prices to spike."

On the 30th of last month, an apartment price list was posted at a real estate agency near Tens Hill in Hawangsimni-dong, Seongdong-gu, Seoul.
Photo by Seungwook Park

"Unless it's a gap investment, jeonse listings will be hard to come by"

Cheonggu 3rd Apartment Complex in Junggye-dong, Nowon-gu, Seoul.
Photo by Seungwook Park

Finding jeonse listings at 'Cheonggu 3rd' in Junggye-dong, Nowon-gu, was like finding a needle in a haystack. The representative of a nearby real estate agency said, "Cheonggu 3rd is in a school district, so listings rarely come out, and with the second semester starting soon, it's difficult for listings to be released," and predicted, "Prices will rise further under these circumstances." He added, "Unless someone buys a house as a gap investment, it will be difficult for jeonse listings to appear in this complex."

The actual transaction price for an 84㎡ jeonse unit at Cheonggu 3rd rose by 180 million KRW in half a year. A resident of the complex said, "When jeonse prices peaked in 2021, I moved in with a jeonse deposit of 900 million KRW, but if prices keep rising like this, I think it might be better to buy a house, so I'm looking into it."

The representative of a real estate agency near 'Lotte Castle Gold Park' in Doksan-dong, Geumcheon-gu, also said, "Because listings are scarce throughout Seoul and it's hard to find a place to move, tenants who have completed four years are willing to pay whatever rent the landlords ask and continue living there." The jeonse price for the third phase of Lotte Castle Gold Park has risen by 80 million KRW this year. An 84㎡ jeonse unit was traded at 730 million KRW earlier this month, with current asking prices reaching up to 790 million KRW.

Prices May Continue to Rise Through Next Year and the Year After

Lotte Castle Gold Park Phase 3 complex in Doksan-dong, Geumcheon-gu, Seoul.
Photo by Seungwook Park

Kim In-man, director of the Real Estate Economic Research Institute, said, "Jeonse is for actual demand, so prices don't fall unless interest rates rise significantly like two years ago or move-in volumes increase substantially," analyzing, "Jeonse price increases should be considered a given; the question is how much they will rise." He continued, "Currently, due to the shortage of apartment supply in Seoul, many tenants are extending their four-year leases, so listings turnover is low," and added, "Prices may continue to rise not only next year but also the year after, so the government's jeonse supply measures are urgently needed."

Ko Jong-wan, director of the Korea Asset Management Research Institute, predicted, "Although jeonse prices may weaken temporarily in Gangdong-gu and Hanam ahead of the November move-in of Olympic Park Foreon, rebuilt from Dunchon Jugong, it will be a temporary phenomenon," and said, "After the move-ins are completed, there will be no one willing to offer cheap jeonse, so it won't help stabilize Seoul's jeonse prices."