Seoul's apartment jeonse supply-demand index hit a record high since June 2021, when jeonse prices were surging. With fewer new jeonse listings and dwellings policy centered on owner-occupancy continuing, the imbalance in jeonse supply and demand is becoming severe.
The jeonse supply-demand index is a figure that scores the proportion of jeonse demand and supply. With 100 as the baseline, the closer it is to 200, the more people are seeking jeonse than offering it. The closer the figure is to 0, the opposite is true.
On the 26th, the Korea Real Estate Board (REB) said that in the third week of April (as of Apr. 20), Seoul's apartment jeonse supply-demand index was 108.4, up 3.2 points (p) from the previous week's 105.2. The weekly increase far outpaced the prior week's 0.7 point.
Seoul's jeonse supply-demand index is at its highest level in about 4 years and 10 months since the fourth week of June 2021 (as of Jun. 28), when it was 110.6. In 2021, due to the impact of the two tenancy laws (right to request contract renewal and cap on rent increases), new jeonse listings dried up, and the annual jeonse increase rate for apartments in the greater Seoul area was quite high.
By region, the northeastern area (Seongdong, Gwangjin, Dongdaemun, Jungnang, Seongbuk, Gangbuk, Dobong, Nowon) had the highest jeonse supply-demand index at 111.3. It was followed by ▲ the northwestern area (Eunpyeong, Seodaemun, Mapo) at 108.6 ▲ the southwestern area (Yangcheon, Gangseo, Guro, Geumcheon, Yeongdeungpo, Dongjak, Gwanak) at 108.2 ▲ the southeastern area (Seocho, Gangnam, Songpa, Gangdong) at 105.3 ▲ the central area (Jongno, Jung-gu, Yongsan) at 105.3.
This deepening imbalance in jeonse supply and demand appears to be the result of a combination of factors, including a shortage of new jeonse inventory and government regulatory policy centered on owner-occupancy. The decline in move-ins of newly built apartments in Seoul is seen as leading to a lack of new jeonse supply. In addition, under the Oct. 15 package last year, all of Seoul was designated a land transaction permit zone, and a two-year owner-occupancy requirement was imposed when purchasing dwellings, blocking gap investing (buying dwellings with jeonse in place), which also contributed to the reduction in jeonse inventory.
In addition, there is analysis that this trend was influenced by a clearer shift of jeonse to monthly rent, as some tenants sought to reduce jeonse loan interest and landlords preferred monthly rent to offset property tax burdens.
Accordingly, jeonse inventory has fallen by more than 30% this year. According to Asil, a real estate big data firm, the number of Seoul apartment jeonse listings stood at 15,422 as of the day, down 33.12% from 23,060 on Jan. 1.
Prices are also rising steeply. In some Seoul districts, the cumulative jeonse increase rate this year has outpaced the sales price increase rate. In Nowon District, jeonse prices rose 3.47% this year, a higher rate than sales prices (3.20%). Dobong District (sales 1.55%, jeonse 2.43%) and Gangbuk District (sales 1.66%, jeonse 2.44%) show a similar situation.