1,593 Multi-Family and Multiplex Rental Transactions in 10 Days After Regulation
Transaction Volume Drops 40% Compared to Same Period Before
Decline Also Seen in Apartments and Officetels
The volume of monthly and yearly rental transactions in Seoul dropped by more than 40% before and after the June 27 loan regulation. The impact of limiting the mortgage loan ceiling to 600 million won is rapidly spreading throughout the rental market. As demand that can no longer purchase homes is shifting to the rental market, and as gap investment (buying homes with existing jeonse tenants) has been blocked, landlords are raising deposits amid expectations that the supply of jeonse properties will shrink, causing transaction volumes to plummet. There are growing calls for government-level measures, as the housing stability of ordinary citizens is under threat.
According to the Ministry of Land, Infrastructure and Transport’s actual transaction price disclosure system, from June 28, when the loan regulation took effect, to July 7?a period of 10 days?the number of multi-family and multiplex rental transactions in Seoul was counted at 1,593. Compared to the 2,712 transactions recorded in the previous 10 days, from June 18 to 27, this represents a 41.3% decrease.
The decrease in rental transactions was also observed in apartments and officetels during the same period. In the apartment rental market, the number of monthly and yearly rental contracts during the 10 days after the loan regulation was implemented was 3,433, a decrease of 41.4%. Officetel rental contracts also dropped to 1,053, down 40.9% compared to before.
The sharp decline in transactions is analyzed as being due to rising monthly and yearly rental prices. Yoon Sumin, a real estate specialist at NH Nonghyup Bank, stated, "This is not due to seasonal differences, and the comparison period is short, so the gap in transaction volume is unlikely to be caused by whether it is a peak season or not," adding, "It appears that the price increase has continued amid growing anxiety over jeonse prices due to the regulation."
The loan regulation, which began on June 27, is acting as a factor driving up monthly and yearly rental prices. As the loan limit has been reduced, demand that can no longer purchase homes is flocking to the rental market. At the same time, with gap investment now prohibited and the supply of rental properties shrinking, monthly and yearly rental prices have risen.
For example, in the case of a 59.8-square-meter multi-family home in Irwon-dong, Gangnam-gu, a jeonse contract was signed for a deposit of 420 million won on June 24. However, on June 28, when the loan regulation began, a monthly rental contract was made for a deposit of 420 million won and a monthly rent of 400,000 won. In addition, a 59.9-square-meter apartment in Maporaemian Prugio 1st Complex in Ahyeon-dong, Mapo-gu, which was traded for 770 million won on June 22, saw its jeonse price jump to 830 million won on July 1.
Yoon added, "At a time when further tightening of regulations is expected, landlords believe they need to raise prices now in order to offset potential losses," and continued, "As it becomes increasingly difficult for tenants to secure funds for jeonse transactions due to stricter bank lending standards, the number of semi-jeonse and similar contracts is also expected to rise."
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