[Jiptok] "Where for Single-Person Households and Newlyweds?"... Seoul Jeonse Prices Soar Only for Small Apartments

Rising Jeonse Prices for Apartments Under 60㎡ Stand Out
Impact of Villa Jeonse Scams and Increasing Single-Person Households
Price Growth Minimal as Area Increases

There is a shortage of small apartment jeonse (long-term lease) units in Seoul. Following the surge in demand for non-apartment jeonse such as villas due to jeonse fraud, the increase in single-person households has also contributed to this trend. Supported by this rising demand, the jeonse prices of small apartments are increasing at a much faster rate than those of large apartments.

Steep Rise in Small Apartment Jeonse Prices

According to KB Real Estate on the 22nd, from January to July this year, the jeonse price index for small apartments in Seoul (exclusive area of 60㎡ or less) rose by 4.8% (86.9 → 91.1). The increase rate for medium-small apartments (61~85㎡) was similarly 4.0% (85.5 → 88.9). The larger the area, the smaller the increase rate. Medium-sized apartments (86~102㎡) rose by 2.6% (84.1 → 86.3), medium-large (103~135㎡) by 2.1% (86.8 → 88.6), and large apartments (over 135㎡) only increased by 1.1% (91.5 → 92.5).

The difference is even clearer when looking at actual transaction prices. According to the Ministry of Land, Infrastructure and Transport, the new jeonse deposit for a 41㎡ unit in Dobong-gu Chang-dong Jugong Complex 3 rose from 180 million KRW in January to 220 million KRW in July this year. Meanwhile, the new jeonse price for a medium-large 134㎡ unit in Chang-dong Donga Cheongsol has remained around 550 million KRW throughout the year.

The same applies to Gangnam. The jeonse price for a 39㎡ unit in Helio City, Songpa-gu, was 630 million KRW in January but rose to 650 million KRW in July. However, during the same period, the jeonse price for a 130㎡ unit in the same apartment dropped from 1.8 billion KRW to 1.7 billion KRW.

Kang Min-seok, head of the real estate team at KB Management Research Institute, explained, "Jeonse demanders prefer small units, and with the villa jeonse fraud incidents, small apartment jeonse prices were most affected. Jeonse prices rose centered on small apartments regardless of Gangnam or Gangbuk."

Gap Investment in Some Gangbuk Areas

The preference for apartment jeonse over villa or multi-family housing jeonse is common throughout the Seoul metropolitan area, including Seoul. Looking at the change rates of jeonse price indices by housing type (January vs. July), apartments rose simultaneously in Seoul (3.72%), Incheon (2.61%), and Gyeonggi (1.85%). In contrast, multi-family housing declined. Especially in Incheon, where a large-scale jeonse fraud incident occurred, the multi-family housing jeonse price index dropped by 1.44%. Gyeonggi also fell by 0.26%, and Seoul remained flat at 0.08%.

To lower apartment jeonse prices, the government introduced a policy to activate non-apartment housing by purchasing and leasing newly built buildings without limit in the metropolitan area through the August 8 real estate measures. However, it is uncertain whether this will immediately stabilize the jeonse market. Kang said, "Although supply measures have been announced, it is difficult for effects to appear immediately, so the strong jeonse price trend is expected to continue through the second half of this year."

Seoul City approved the architectural plan for the reconstruction project of Sanggye Jugong Complex 5 at the 15th Architecture Committee meeting. The photo shows Sanggye Jugong Complex 5 in Nowon-gu, Seoul, on the 31st. Photo by Jinhyung Kang aymsdream@

The jeonse price ratio, which indicates the proportion of jeonse price to sale price, is also continuously rising. It is analyzed that the jeonse price is increasing faster than the house price. According to KB Real Estate, the jeonse price ratio for apartments in Seoul in July was 53.9%, marking the highest level in 1 year and 8 months. The 14 districts in Gangbuk (56.3%) had a higher jeonse price ratio than the 11 districts in Gangnam (51.7%).

In some Gangbuk areas where house prices have not risen significantly, gap investment movements are also being detected. A real estate agent in charge of Sangye Jugong Complex 7 in Nowon-gu explained, "The current sale asking price is around 520 million KRW, and the jeonse asking price is about 250 million KRW. Jeonse prices have risen by up to 50 million KRW compared to early this year, so people are inquiring about buying houses with jeonse."