September lease transaction in Seoul lowest in 7 years
Listings are piling up and price growth is slowing
A direct hit to household debt management in the banking sector
Will Gangdong-gu, where there is a lot of occupancy, be adjusted?
“There are still concerns about supply shortage… “temporary phenomenon”
Photo = Hankyung DB Last month, apartment rental transactions in Seoul were expected to hit the lowest level in seven years. It is interpreted that the demand for jeonse has decreased due to the strengthening of household debt management and the increase in jeonse prices for 75 consecutive weeks. Both the sales and rental markets are being affected by the tightening of lending by the financial sector. As large-scale housing complexes are scheduled to open in Seoul in the fourth quarter of this year, attention is being paid to whether rental prices will show a downward and stable trend in the future.
Transactions are decreasing and listings are piling up.
According to the Seoul Real Estate Information Plaza on the 30th, the number of lease and monthly rent contracts for apartments in Seoul last month was 7,826 and 5,644, respectively. Jeonse decreased sharply by 30.8% (3,491) compared to August (11,317), and monthly rent decreased by 1,480 during the same period. It is predicted that apartment rental transactions in Seoul will hit the lowest level since October 2017 (7,599 cases).
Lease items are also piling up. According to real estate big data company Asil, there are 31,790 apartment rentals in Seoul on the market. As of the end of August, the number of jeonse was around 26,000, but it has been increasing since last month when the government’s loan regulations came into effect.
Along with the decrease in transactions, the rate of increase in rental prices is decreasing. According to the weekly apartment price trend announced by the Korea Real Estate Board, in the third week of this month (as of the 21st), the rental price of apartments in Seoul increased by 0.09% compared to the week before. It has been jumping for 75 consecutive weeks, but the range of fluctuations has been gradually decreasing since the third week of August (up 0.20%). The explanation is that as the upward trend has continued for nearly a year and a half, consumer fatigue is building up.
Move-in volume in Gangdong-gu and other areas in the 4th quarter is variable
The jeonse market is taking a direct hit as the banking sector stopped providing conditional jeonse funds in August to prevent gap investments (selling and selling along with jeonse), and has recently taken measures to restrict jeonse loans for owners of one home. The Bank of Korea lowered the base interest rate by 0.25 percentage points at the Monetary Policy Committee meeting held on the 11th, but it is difficult for consumers to feel the effect due to lending regulations.
The increase in the number of move-ins in the fourth quarter, such as ‘Olympic Park Foreon‘ in Dunchon-dong, Gangdong-gu, with 12,032 households, is considered to be the cause of the short-term decrease in rental transactions. This means that apartments looking for tenants are pouring in. At ‘Olympic Park Foreon’ alone, there are about 2,900 rentals listed. ‘Gangdong Millennial Jungheung S Class’ in Cheonho-dong, Gangdong-gu, which started moving in this month, and ‘The Sharp Dunchon Foret’ in Dunchon-dong, which is holding a housewarming ceremony next month, also have about 400 and 200 listings piled up. ‘Centreville Asterium Signature’ in Yeokchon-dong, Eunpyeong-gu, ‘Seoul Forest I-Park River Foret 1st’ in Seongsu-dong, Seongdong-gu, and ‘Hoban Summit Gaebong’ in Gaebong-dong, Guro-gu are also busy recruiting tenants ahead of move-in within the year.
In the industry, there is a possibility that jeonse prices may be adjusted in areas with a lot of occupancy, such as Gangdong-gu, and surrounding areas such as Songpa-gu, due to the decline in jeonse demand and large-scale supply. However, it is pointed out that the fact that the number of apartments in Seoul is expected to be relatively low after next year is the biggest variable in the jeonse market.
Some say that some banks are planning to resume conditional jeonse loans and that there may be an increase in jeonse transactions due to expectations of further interest rate cuts. Lee Eun-hyung, a researcher at the Korea Construction Policy Institute, said, “Except for some areas where large-scale buildings such as Olympic Park Foreon are moving in, rental prices may show a gradual increase.” “Unless arrangements are made, there are still greater concerns about supply shortages,” he explained.
Soo-min Yoon, a real estate expert at Nonghyup Bank, said, “The government’s loan regulations have temporarily suppressed demand for sales and rentals,” adding, “There are quite a few tenants who postponed contracts in anticipation of further cuts in the base interest rate or easing of loan regulations, so transactions are active again as the situation changes. “It could happen,” he analyzed.
Reporter Kim So-hyun alpha@hankyung.com
