Move-ins are ramping up at newly built mega apartment complexes in Songpa District, Seoul, but the jeonse market is instead showing an upward trend. Typically, when a large apartment complex begins move-ins, the supply of jeonse units increases and nearby jeonse prices temporarily fall, a phenomenon known as the "move-in market effect." But the supply of jeonse units coming to market is not growing much, so jeonse prices are not falling.
According to the Korea Real Estate Board (REB) on the 14th, Songpa District's jeonse price change rate for the first week of January (as of the 5th) was 0.09%. During the same period, the KB Real Estate statistics showed a jeonse price change rate of 0.07%. Although move-ins at newly built mega apartment complexes in Songpa District begin this month, the move-in market effect—where jeonse supply floods the market and nearby jeonse prices temporarily drop—is not appearing.
Among the 1,865 units scheduled to begin move-ins this month at Jamsil Le-El, there are only 64 jeonse listings (based on ZIGBANG CO.). There are 84 monthly rent listings, outnumbering jeonse. Jamsil Raemian I-Park, which began full-scale move-ins this month, likewise has only 107 jeonse and 73 monthly rent listings out of 2,678 units.
Generally, when move-ins at newly built mega apartment complexes start, the so-called move-in market effect causes nearby jeonse prices to fall. When Helio City (9,510 units) in Songpa District, Seoul, began move-ins in 2018, jeonse listings flooded the market, and jeonse prices in surrounding complexes fell like dominoes. In Jamsil, jeonse prices for 84-square-meter exclusive-use apartments fell to around 200 million won.
However, this move-in market effect appears to have disappeared recently due to tighter real estate regulations and a shortage of housing supply. After the June 27 lending curbs, jeonse loans conditional on ownership transfer were blocked, making it difficult to settle the balance with tenants' loan funds. As a result, instead of offering jeonse, more landlords are moving in themselves or signing monthly rent leases, reducing the jeonse supply itself.
In addition, both Jamsil Le-El and Jamsil Raemian I-Park are subject to the presale price cap system, which imposes a mandatory occupancy requirement, another reason cited for the lack of jeonse supply. Even when jeonse units do appear, many come with a three-year occupancy special clause.
Kim In-man, head of the Kim In-man Real Estate Economy Research Institute, said, "Because policy imposes a mandatory occupancy requirement, landlords tend to move in rather than find tenants," adding, "In particular, newly built apartments are scarce, so some people inspect them in advance and then move in." Kim added, "With jeonse loans conditional on ownership transfer banned, landlords can't use a tenant's jeonse loan at balance payment, making it harder for tenants to move in, which has started to freeze the jeonse market."
Ham Young-jin, head of the Woori Bank Real Estate Research Lab, explained, "With jeonse loans conditional on ownership transfer banned, in the case of dwellings under the presale price cap system (such as Jamsil Le-El), even if one does not move in immediately, the need to fulfill the actual occupancy period three years later is interacting in complex ways to affect the jeonse market."
Analysts also say that with jeonse terms guaranteed up to four years and increases in deposits capped, there is a trend against setting low initial jeonse prices, which has recently affected Songpa's jeonse market. Park Won-gap, chief real estate expert at KB Kookmin Bank, said, "Now jeonse basically runs 2+2 years, and there's a perception that if you list below the surrounding market price at the start, you won't be able to raise the price two years later," explaining why jeonse below market is not appearing even during mega-complex move-ins.
Some also assess that Seoul's severe shortage of housing supply means the roughly 4,000 units moving into Songpa District alone cannot stabilize the jeonse market. Kim said, "Even if Jamsil Le-El or Jamsil Raemian I-Park begins move-ins, there is no move-in volume citywide in Seoul," adding, "Moreover, with jeonse at 2+2 years for up to four years of residence and loans for purchasing dwellings hard to obtain, tenants are not moving out, so existing jeonse supply is not coming to market."