This year, the nationwide increase in apartment jeonse prices has outpaced the rise in sale prices, signaling renewed instability in the rental market. Both metropolitan and non-metropolitan areas have experienced a surge in jeonse prices, with Seoul also nearing a point where jeonse prices could surpass sale prices.
According to the Korea Real Estate Agency on May 11, the cumulative increase in nationwide apartment jeonse prices reached 1.56% as of the first week of May. In comparison, the increase in sale prices was 0.98%, indicating that jeonse prices are 0.58 percentage points higher.
In the metropolitan area, jeonse prices rose by 2.20% this year, exceeding the sale price increase of 1.79% by 0.41 percentage points. Non-metropolitan areas also saw jeonse prices rise by 0.94%, which is 0.74 percentage points higher than the sale price increase of 0.20%.
In Seoul, while the sale price increase of 2.81% still exceeds the jeonse price increase of 2.61%, the gap has narrowed to just 0.20 percentage points. Notably, in the first week of May, jeonse prices in Seoul rose by 0.23%, marking the highest increase since the third week of November 2015, when it was 0.26%.
Regions with the highest cumulative increases in jeonse prices include Suwon Yeongtong-gu (4.57%), Anyang Dongan-gu (4.53%), Muan-gun in Jeollanam-do (4.39%), Seongbuk-gu in Seoul (4.20%), Giheung-gu in Yongin (4.16%), Gwangmyeong City (4.08%), and Nowon-gu in Seoul (4.06%).
The trend of jeonse prices surpassing sale prices is attributed to changes in the supply structure. With stricter lending regulations and increased taxation on multiple homeowners, the number of landlords holding properties with jeonse has decreased, while actual demand has shifted towards jeonse rather than sales, leading to a widening supply-demand imbalance.
In the Gangnam area of Seoul, the sales market has slowed due to the expiration of the tax exemption for multiple homeowners, while the jeonse market has remained relatively strong. In Seocho-gu, sale prices increased by 1.00% this year, while jeonse prices surged by 3.65%, creating a gap of 2.65 percentage points. In Gangnam-gu, sale prices fell by 0.38%, but jeonse prices rose by 0.84%, and in Songpa-gu, sale prices increased by 1.37% while jeonse prices rose by 2.09%, indicating a larger increase in jeonse.
In Yongsan-gu, the increase in jeonse prices (2.36%) also outpaced the sale price increase (1.13%), while in Nowon-gu, jeonse prices rose by 4.06% amid a strong sale price increase of 3.48%.
Experts warn that if the trend of rising jeonse prices continues, it could trigger a 'price transfer' effect that stimulates sale prices again. There are concerns that the rising jeonse rates could reignite a rental crisis similar to past situations, where increased jeonse prices led to higher sale prices.
Seojin Hyung, a professor at Kwangwoon University’s Department of Real Estate, stated, "The government's one-household, one-home policy, supply shortages, and a lack of non-apartment housing are major causes of the rental crisis. The ongoing reduction in rental supply will inevitably exacerbate the rental crisis."
He added, "As tenants unable to cope with rising jeonse prices move to the monthly rental market, the trend towards monthly rentals will accelerate. Policy responses, such as expanding public rental supply, are necessary."
* This article has been translated by AI.
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