Jeonse market in Seoul sees a sharp decline, with the ratio of jeonse to apartment sales expected to fall below 50% soon, according to a report by KB Kookmin Bank. The rental price rate for apartments in Seoul was only 51.2% in February, the lowest figure in over a decade, down from 53.9% in November 2022. Jeonse rental rates in Seoul’s regulated areas have all dropped below 50%, with Gangnam-gu having the lowest rate at 42.5%, followed by Yongsan-gu, Songpa-gu, and Seocho-gu. Only Yangcheon-gu is above the threshold at 49.1%.
The main reason for the jeonse market slump is the decline in jeonse prices, which have fallen more sharply than apartment prices, especially in response to changes in the financial environment, such as high interest rates and loan regulations. In 2022, apartment prices in Seoul dropped by 2.96%, while jeonse prices fell by 5.45%, according to KB’s survey. Even this year, the sales price recorded negative growth in January and February, but the jeonse price decline was even more pronounced.
As a result, investing in gaps purchased with jeonse is becoming increasingly difficult, especially with tighter regulations on borrowing money based on the degree of principal and interest repayment burden compared to income. While the actual transaction price of houses has temporarily increased, there is not enough demand to lead to a full-fledged market price rebound, said Park Won-gap, senior real estate expert at KB Kookmin Bank. The jeonse rental rate trend is also declining in other areas, such as Gyeonggi-do and Incheon, suggesting a general slowdown in the market.