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▲ A view of the apartment complexes in downtown Seoul from N Seoul Tower in Namsan, Seoul. (Yunhap news)
As the cheonsei crisis continued, the gap between the sale price of the apartment and the rental price narrowed.
According to KB Kookmin Bank, last month, the apartment rental rate in Seoul (the ratio of rental price to purchase price) was 54.2%, 0.6 percentage points higher than the previous month (53 , 6%). It has been increasing for the second month in a row since August. It has been four years since June 2016 that the rent for apartments in Seoul has dropped by two months.
By autonomous district, the jeonse rate in 24 of the 25 autonomous districts of Seoul, except Jungnang-gu, increased from a month ago. Jongno-gu (63.0) had the highest jeonse rate in Seoul, followed by Jung-gu (61.4) and Seongbuk-gu (60.3%).
In other areas of the metropolitan area, the jeonse rate increased from 69.9 to 70.7 in Gyeonggi and from 71.9 to 77.5 in Incheon. The average price of jeonse in the metropolitan area is 65.5.
In August this year, Seoul apartment rentals were the lowest since 2012. Although the total price has increased so far, this is because the rate of increase in the bargain price has been faster. The reversal of the jeonse price trend means that the jeonse price has started to rise faster than the trading price.
The market believes that the new housing rental protection law, which came into effect at the end of July, has become a turning point. This is due to the phenomenon of landlords calling in new contractors above the existing market price, circumventing regulations such as the ‘2 + 2-year contract renewal claim’ and the ‘monthly rent increase ceiling system of the 5%’. As the fall moving season continued and the number of existing tenants opting to renew their contracts at higher jeonse prices increased, the volume chartered became more valuable. According to the Korea Appraisal Board, the apartment rental rate in Seoul last week was 131.1, which changed to the highest in a week after the statistics were written. The higher the supply and demand ratio for jeonse, the more severe the supply shortage.
When the jeonse price rate goes up, it is easy to make a “hole reversal” to buy a house with a cheonsei. This is because you can buy a house with only the difference between the sale price and the jeonse price, which reduces the financial burden. If the jeonse rate is 60%, you can buy a house for only 40% of the house price. The government has tightened credit regulations to block investment from the gap, but if the jeonse price rate continues to rise, the regulation could become ineffective.
