"Nationwide Jeonse Expected to Rise 4% Next Year... Largest Forecast in 7-8 Years" [Real Estate AtoZ]

Jeonse Prices Rise Due to Multiple Factors Including Decrease in New Housing Supply
Nationwide Home Sales Prices Expected to Increase by 0.8%... Decline Anticipated in Non-Metropolitan Areas

Kim Seonghwan, Research Fellow at the Korea Construction Industry Research Institute, is giving a presentation at the "2026 Construction, Materials, and Real Estate Market Outlook and Market Stability and Sustainability Seminar" held on the 4th at the Construction Hall in Gangnam-gu, Seoul. Photo by Lee Jungyoon

It is forecast that while nationwide housing prices will rise by 0.8% next year, jeonse rental prices will increase by a higher rate of 4%.

Kim Seonghwan, Research Fellow at the Korea Construction Industry Research Institute, projected at the "2026 Construction, Materials, and Real Estate Market Outlook and Market Stability and Sustainability Seminar" held on the 4th at the Construction Hall in Gangnam-gu, Seoul, that nationwide jeonse prices will rise by 4% in 2026. This figure is 3 percentage points higher than this year’s projection of 1.0%.

Kim identified several major factors behind the sharp rise in jeonse prices: a decrease in new housing supply, increased demand for jeonse due to a slowdown in home purchases, a reduction in available jeonse properties caused by the designation of Land Transaction Permission Zones, and the exercising of contract renewal rights. In particular, due to the October 15 measures, Seoul and the greater metropolitan area have been designated as Land Transaction Permission Zones, making it impossible for homeowners to lease out their properties for two years after purchase. In addition, when taking out a mortgage loan in the metropolitan area, there is now an obligation to move in within six months, further restricting rental supply and leading to a continued decrease in jeonse listings.

Kim stated, "I have been forecasting prices for seven to eight years, and this is the largest increase I have ever predicted," adding, "Statistics show that demand for actual occupancy continues to rise, but the designation of Land Transaction Permission Zones is reducing the supply of jeonse properties." He continued, "Contract renewal claims are also ongoing, and with these various factors combined, I believe jeonse prices are likely to rise significantly."

Kim also forecast that nationwide housing sales prices will increase by 0.8% next year. He analyzed that the ongoing supply shortage and concentrated demand in the metropolitan area will result in a 2.0% increase in the metropolitan region, while prices in non-metropolitan areas are expected to fall by 0.5%.

In addition, Kim emphasized the need to pay attention to the synchronization trends between real estate and other asset classes. He noted, "There is a very high correlation coefficient with the KOSPI, NASDAQ, and even Bitcoin and gold futures," and added, "With the KOSPI surpassing the 4,100 mark, it is worth considering how these factors might affect housing prices."

Kim also presented next year’s supply outlook, projecting 470,000 units for annual housing permits and 250,000 units for new sales. While housing permits are expected to increase due to expansion centered on the private sector in the metropolitan area and a recovery in public sector volume, he argued that after next year, the total supply growth will be limited, as the public sector will absorb the volume that was originally planned for private supply.

Regarding the pre-sale market, Kim predicted that despite strong demand for new builds, concerns about supply constraints will persist due to high construction costs and various regulations. As a result, demand will continue to concentrate in key locations in both the metropolitan and non-metropolitan areas, and polarization will intensify, with both sold-out and unsold units coexisting within the same regions.

Meanwhile, domestic construction orders next year are expected to reach 231.2 trillion won, a 4.0% increase from this year. While expansion in public sector orders will drive the overall market, private sector orders are expected to increase only marginally. Construction investment is projected to rise by 2.0% year-on-year to 270 trillion won.

Lee Jihye, Research Fellow at the Korea Construction Industry Research Institute, assessed, "Even if there is some improvement in construction investment and orders next year due to increased investment in social overhead capital and public sector orders, it will be difficult to see this as a significant recovery."

She added, "Interest rates, construction costs, project financing risks, and regulatory environments are all acting simultaneously, slowing the recovery in the private sector. While short-term volume creation is the starting point for recovery in the construction industry, in the medium to long term, strategic investment focused on technological innovation, sustainability, and linkage with future industries, rather than simple volume investment, is necessary."