As the greater Seoul area is designated as a regulated area, the supply-demand imbalance in the dwellings lease market is widening. The number of Seoul apartment jeonse listings has fallen 22% just this year, and as a result, jeonse prices have risen for 45 straight weeks. As people pushed out of Seoul move in, Gyeonggi Province is also seeing a deepening shortage of jeonse listings, and some expect this jeonse crunch to continue next year.
According to the Korea Real Estate Board (REB) on the 15th, the Seoul apartment jeonse supply-demand index for the second week of Dec. (as of the 8th) was 104.7. The jeonse supply-demand index measures whether demand or supply is stronger on a scale of 0 to 200; a reading above 100 means demand exceeds supply. The Seoul apartment jeonse supply-demand index was below 100 until mid-May, then continued to climb, with the pace of increase accelerating after the announcement of the Oct. 15 real estate measures.
With so-called "gap investing," in which buyers purchase a home with a tenant in place, no longer possible, the supply of jeonse listings has shrunk sharply. Through the June 27 real estate measures, the government banned "jeonse loans conditional on transfer of ownership (loans in which the tenant takes out a jeonse loan on the condition that the ownership of the dwellings changes hands on the day the loan is issued)," and in the Oct. 15 measures expanded land transaction permit zones from the three Gangnam districts (Gangnam, Seocho, Songpa) and Yongsan in Seoul to all of Seoul and 12 locations in Gyeonggi Province. In permit zones, there is a two-year owner-occupancy requirement from the date of acquisition of the dwellings, so they cannot be leased out on jeonse.
According to the real estate platform Asil, as of that day there were 24,854 Seoul apartment jeonse listings, down 21.9% from early January this year (31,814). A real estate agent in Seoul's Gangnam District said, "Until the real estate measures were announced, 30% to 40% of buyers would purchase an apartment and then put it on jeonse. But as the jeonse supply that had been provided via gap investing vanished, it has become hard to find jeonse listings."
Jeonse prices are also rising. In the second week of Dec., Seoul apartment jeonse prices compiled by the Korea Real Estate Board (REB) rose 0.15% from the previous week. They have risen for 45 consecutive weeks since the first week of Feb. This trend is spreading to Gyeonggi Province. Gyeonggi apartment jeonse listings have plunged 38.7% this year (31,110 → 19,071). In the second week of Dec., jeonse prices rose 0.12% from a week earlier, the record high for the year.
The problem is that this trend is likely to continue next year. According to Real Estate R114, the number of Seoul apartment move-ins is expected to plunge 31.6%, from 42,611 units this year to 29,161 units next year. Park Hap-su, an adjunct professor at Konkuk University's Graduate School of Real Estate, said, "Not only Seoul but also Gyeonggi Province is likely to see the jeonse crunch continue through next year," adding, "In Gyeonggi, on top of the jeonse demand flowing in from Seoul, the province's own shortage of dwellings supply could further intensify the supply-demand imbalance."