"Next Year Looks Unsettled"... Jeonse Supply Cliff Emerges First in Northern Seoul [Real Estate AtoZ]

Impact of Gap Investing Restrictions and Tighter Regulations
Seoul's Jeonse Supply-Demand Index Surpasses National Average
Growing Concerns Over a Sharp Rise in Jeonse Prices Next Year

Apartment complex in Seoul. Photo by Yonhap News

Recently, a shortage of jeonse (long-term rental deposit) apartment listings has been spreading in the Seoul market. As gap investment (buying homes with tenants in place) has been blocked, the supply of jeonse properties continues to decline, resulting in a landlord-favored market. This trend is particularly pronounced in northern Seoul, where jeonse prices are relatively lower compared to Gangnam. Concerns are mounting over a potential sharp increase in jeonse prices next year.

According to the Korea Real Estate Board on November 24, last month’s jeonse supply-demand index for Seoul apartments was 105.0, which is 5.3 points higher than the national average of 99.7. As recently as June, Seoul’s index stood at 102.4, but it has been steadily rising. The index ranges from 0 to 200, with a reading above 100 indicating that demand exceeds supply, and a reading below 100 indicating an oversupply of jeonse properties.

The shortage of jeonse apartment listings in Seoul is gradually worsening. Due to the June 27 and October 15 policy measures, buyers of Seoul apartments are now required to move in, and gap investment has been restricted. As demand for purchasing homes with tenants in place has decreased, the supply of jeonse listings has shrunk further. Rising home prices have pushed up jeonse prices, leading more tenants to renew their contracts, which has also contributed to the decrease in available listings. Seoul’s jeonse prices continue to rise, increasing from 573.72 million won in June to 579.26 million won in September, and reaching 582.99 million won last month.

Demand for jeonse apartments was relatively higher in the northeastern area of northern Seoul (Seongdong, Gwangjin, Dongdaemun, Jungnang, Seongbuk, Gangbuk, Dobong, and Nowon districts). Last month, the jeonse supply-demand index for this area was 106.4, higher than the Seoul average. In contrast, the southeastern area of Gangnam (Seocho, Gangnam, Songpa, and Gangdong districts) recorded a lower index of 104.4.

A major factor is the reduction in the loan limits for policy loans supporting jeonse. As available funds have decreased, young people just entering society and newlywed couples seeking to settle in Seoul are choosing areas with less financial burden, which has led to increased demand in northern Seoul. Under the June 27 policy, the loan limit for the “Buttress” jeonse loan for young people was reduced from 200 million won to 150 million won, and for newlyweds from 300 million won to 250 million won. The loan limit for newborns’ jeonse loans also decreased from 300 million won to 240 million won. Last month, the average apartment price in the northeastern area of northern Seoul was the lowest at 452.25 million won. In the southeastern area of Gangnam, the average price was nearly twice as high at 883.86 million won.

Yoon Sumin, a real estate specialist at NH NongHyup Bank, explained, “With the decline in apartment supply in Seoul becoming more pronounced and jeonse inventory continuing to decrease due to restrictions on gap investment, we expect the landlord-favored market to intensify next year. Given that the apartment market in the northeastern area of northern Seoul is relatively rental-oriented, anxiety in that region is particularly high.”