This year, about 7,000 households are expected to relocate as demolition proceeds at redevelopment complexes in the three Gangnam districts of Seoul (Gangnam, Seocho, and Songpa). With move-in supply down about 20% from a year earlier and relocation demand piling up, there are forecasts that jeonse and monthly rent prices in nearby areas will jump.
According to Seoul City's redevelopment portal on Jan. 16, among redevelopment business sites in the three Gangnam districts that have received project implementation approval and management and disposition approval, seven complexes totaling 6,938 households are pushing or planning relocations this year. Relocations typically take place within three to six months, and after relocation is completed, demolition and groundbreaking follow, taking about three to four years until residents move into new apartments. Union members usually take out relocation loans during this period and live on jeonse or monthly rent in nearby complexes.
In Ilwon-dong, Gangnam District, relocation of union members at "Ilwon Gaepo Hanshin (364 households)," which began in Oct. last year, will be completed on the 31st. In Gaepo-dong, "Gaepo Jugong Complex 5 (940)" began relocation on the 8th. "Dogok Gaepo Hanshin (620)" in Dogok-dong and "Gaepo Jugong Complexes 6 and 7 (1,960 households)" in Gaepo-dong are slated to relocate in the second half of this year. That amounts to the relocation of about 4,000 households in Gangnam District alone
In Seocho District, "Shinbanpo 27th (156)" in Jamwon-dong began relocation last month. "Shinbanpo 16th (396)" will start next month, and "Shinbanpo 12th (324)" will begin in April. In Songpa District, relocation of "Garak Samik Mansion (936)," which reaches 1,000 households, will begin in April, making a large-scale move unavoidable.
With gap investing (buying with existing jeonse tenants) made impossible by the Oct. 15 real estate measures and jeonse supply shrinking sharply, jeonse prices are rising quickly as relocation demand overlaps. According to the Korea Real Estate Board (REB), last month the apartment jeonse price index in Seocho District, Seoul, jumped 1.71% from the previous month. It is the highest level in about 13 years since Nov. 2012 (1.79%). It also surpassed the record high during the Moon Jae-in administration when home prices surged (June 2021, 1.63%). In Gangnam District, the jeonse price index rose 0.49% during the same period, the highest level of last year. Songpa District also climbed 0.67%.
As jeonse supply fell, jeonse prices continued to rise due to a supply shortage. In Banpo-dong, Seocho District, a jeonse contract for an 84-square-meter unit at "Raemian One Pentas" was signed this month with a 2 billion won deposit. When residents moved in Aug. 2024, the same size traded at 1.4 billion won. There are currently no jeonse listings available for 84-square-meter units at Raemian One Pentas.
A licensed real estate agent in Jamwon-dong, Seocho District, said, "This year, Shinbanpo redevelopment complexes are about to relocate, and because of this, more people have been asking about jeonse homes since the end of last year," adding, "Jeonse for newly built apartments goes for whatever the landlord asks."
A licensed real estate agent in Gaepo-dong, Gangnam District, said, "Tenants who were renting in redevelopment complexes because of their children's school issues are in a bind," adding, "They can't transfer their kids, so they are trying to find jeonse in the neighborhood, but as prices rise, some have lowered their sights to officetels or low-rise apartment."
The problem is that this year's move-in supply will make it difficult to meet such demand. Ultimately, supply-demand imbalances are expected to worsen and push up jeonse prices. Ham Young-jin, head of Woori Bank's Real Estate Research Lab, said, "New move-in supply in the three Gangnam districts will fall 20%, from 9,405 households last year to 7,588 households," adding, "But excluding union member allocations, only 30% is for general pre-sale, so there are actually just 2,276 homes available to move into. Jeonse prices for Gangnam apartments will inevitably rise again this year."