Apartment sales fell in first half
However, jeonse, or lump-sum deposit rentals, continue to see prices surge. It has reached a point where the jeonse price on a 83-square-meter apartment has risen to 1 billion won for a two-year contract.
According to local realty industry insiders, landlords of 83-square-meter apartments in Banpo Acro Riverpark in Seocho District, southern Seoul, are asking as much as 1 billion won ($882,790) from jeonse tenants.
Acro Riverpark, a reconstructed apartment building, will see residents move in at the end of this month. There are 1,612 apartment units with sizes ranging from 83 square meters to 234 square meters. There are 323 units with a size of 83 square meters, and 40 of them are up for jeonse. Realtors say the landlords of four units are asking for jeonse of 1 billion won while others are asking in the 900 million won range.
The highest jeonse price so far has been 950 million won for a 83-square-meter apartment. This includes an apartment in Hannam The Hill in Yongsan District, central Seoul, where a contract was signed in March, and three units at the Raemian Firstige in Banpo-dong, southern Seoul, leased last month.
These jeonse prices are not much different from the actual purchasing price. A 83-square-meter apartment in Hannam The Hill current sells for 1.03 billion won. A same-size unit in the nearby Raemian Firstige goes for 1.15 billion won, and at Acro Riverpark, the selling price is near 1.2 billion won.
“Compared to the Raemian Firstige, which was redeveloped eight years ago, the Acro Riverpark is new and has a great view [of the Han River],” said Jeong Cheol-yong, a real estate agent in Banpo-dong.
Although these are high-end apartments situated in a posh neighborhood, the reason jeonse prices have continuously been growing in recent years is largely due to a shortage of supply, as many homeowners have been switching to monthly rent contracts, especially since the central bank has lowered its key interest rate to the 1-percent range. In the past, when interest rates were high, homeowners would stash the lump sum they received from tenants living on jeonse in savings accounts.
In fact, the number of total rent contracts, including jeonse and monthly rent contracts, have slightly retreated, falling 3.1 percent to 748,000 units in the first half, according to the Ministry of Land, Infrastructure and Transport on Thursday.
In June alone, the number of total rent contracts have declined 8.5 percent from a year ago to 114,984 units. The figure is also 5.2 percent smaller than May’s 126,000.
But the number of monthly rental contracts continued to increase in the first half of the year and now accounts for 46 percent of all rents. That’s 2.6 percentage points more than the 43.4 percent increase a year ago.
Some realtors speculate that the jeonse situation will likely ease in the second half.
“The jeonse price growth will likely settle lower than in the previous years on average because the number of apartments available in the second half will increase,” said Kwon Il, head of the research team at Budongsan Info, a real estate information provider.
Budongsan Info estimates that the greater Seoul area alone will have a supply of nearly 40,000 apartment units in the second half.
Meanwhile, the apartment market has frozen significantly. Transactions in the first half of the year plummeted 23.4 percent from a year ago to 468,000 units. Even in June alone, transactions have fallen 16.1 percent to 92,611 units.
Provincial areas suffered more than the greater Seoul area, which includes Gyeonggi and Incheon. The greater Seoul area saw a 22 percent decline whereas provincial areas tumbled 25 percent.
BY AHN JANG-WON, LEE HO-JEONG [email@example.com]