Seoul's apartment market is stirring again. Not only sale prices but also jeonse and monthly rents are jumping sharply across the board, entering a "triple rally."
According to the Korea Real Estate Board (REB) on the 17th, Seoul apartment prices rose a cumulative 3.10% from the start of the year through the second week of May. That is double the pace of the same period last year, when they climbed 1.53%.
The monthly home price increase, which was 1.07% in January, kept shrinking to 0.74% in February and 0.34% in March, appearing to cool. But it rebounded to 0.55% in April. On a weekly basis, the rise held steady at 0.14%–0.15% from the third week of April to the first week of May, then clearly widened to 0.28% in the second week of May, the first release after the end of the capital gains tax surcharge deferral.
The overheating in the lease market is even more serious. Through the second week of May, Seoul's cumulative jeonse price increase this year was 2.89%. While numerically lower than sale prices, it is six times faster than the same period last year (0.48%). Monthly rents paid each month show a similar picture. The cumulative increase in monthly rents through April was 2.39%, far outpacing the same period last year (0.57%).
Prices are soaring because listings are far too scarce compared to the number of people trying to find a home. The supply-demand index, which reflects the balance between supply and demand, shows a clear seller's market. Using 100 as a baseline, the closer to 200, the more buyers there are relative to sellers. The closer to 0, the opposite is true.
In the second week of May, the sale supply-demand index was 108.3 and the jeonse supply-demand index was 113.7, both hitting their highest levels in about five years since March 2021. The monthly rent supply-demand index in April also marked 109.7, a record high since October 2021. The weekly sale supply-demand index is the highest since the first week of March 2021 (108.5), and the jeonse supply-demand index is the highest since the second week of the same month (116.8). The April monthly rent supply-demand index is a record high since October 2021 (110.6).
The key question is how long this phase will persist and become entrenched. In the sale market, the amount of money in circulation and the lending rate are the main variables that will shape the path ahead. As of March this year, the broad money supply (average M2 balance) stood at 4,132.1 trillion won, rising for five straight months since November last year. If assets earned in the recently booming stock market start moving in earnest into real estate, home price gains will only intensify.
Most observers expect the steep rise in jeonse and monthly rents to continue. According to the Korea Real Estate Board (REB)'s April housing price trend survey, while Seoul apartment sale prices rose 0.55%, jeonse climbed 0.82% and monthly rents 0.74%. The fallout from jeonse fraud in non-apartment segments such as villas and row houses has increased the number of tenants seeking apartments, while move-in supply of new-build apartments to provide jeonse units is insufficient.
Although the government said in the Sept. 7 package last year that it would supply 1.35 million dwellings, including public housing, to the Seoul metropolitan area by 2030, that target is based on groundbreakings, and it takes at least two to three years for buildings to be completed and occupied.