Gangbuk-gu, Dobong-gu cross 60% threshold for first time since Moon administration; Nowon-gu reaches highest level since April 2020; analysts say tight supply and end-user demand could push sale prices higher
Apartment jeonse-to-sale price ratios — the proportion of a unit's sale price represented by its jeonse deposit — in Seoul's outer districts, including Nowon-gu, Dobong-gu and Gangbuk-gu, have reached their highest levels in more than six years. The ratios have climbed back to levels last seen during the Moon Jae-in administration, when jeonse prices surged sharply. Analysts attribute the trend to land transaction permit regulations and a persistent housing supply shortage that has kept lease prices rising. As jeonse prices — which act as a floor for sale prices — continue to climb, upward pressure on home values is intensifying.
According to KB real estate data released Friday, the jeonse-to-sale price ratio for apartments in Gangbuk-gu stood at 63.48 percent in May, the highest since December 2019 (63.57 percent) — a gap of six years and five months. Nowon-gu came in at 55.57 percent, its highest since April 2020 (55.65 percent), while Dobong-gu hit 60.02 percent, crossing the 60 percent threshold for the first time since January 2020, a span of six years and four months.
Beyond those three districts, other outer-ring areas also posted elevated ratios: Guro-gu at 58.6 percent, Geumcheon-gu at 62.8 percent and Jungnang-gu at 62.9 percent.
Analysts say the rise in jeonse-to-sale price ratios reflects a surge of end-user buyers into mid-to-low-priced districts where sale prices are relatively affordable compared with other parts of Seoul. As more buyers move in to occupy their units, the pool of available jeonse listings has shrunk and prices have climbed steeply.
As of Friday, only 77 jeonse listings were available in Gangbuk-gu — a 44 percent drop from 138 listings six months earlier. Nowon-gu saw available listings plunge 63 percent over the same period, from 697 to 248, while Dobong-gu fell 49 percent, from 339 to 174.
Song Seung-hyeon, chief executive of the research firm Dosi wa Gyeongje, said outer Seoul districts such as Nowon-gu, Dobong-gu and Gangbuk-gu have a high share of transactions below 1 billion won ($723,000), meaning buyers tend to move in themselves, and as existing tenants vacate, the supply of jeonse and monthly rent units is falling short of demand. "In addition, many residents in these areas have relatively lower incomes compared with those in prime districts, so some stay in jeonse or wolse rather than buying — which is concentrating rental demand," he said.
The concern is that rising jeonse-to-sale price ratios act as an upward driver for sale prices. Industry practitioners generally regard the 60 to 70 percent range as the threshold at which jeonse-to-sale price ratios begin to translate into sale price increases.
Song said that even when jeonse-to-sale price ratios rise, a large supply of listings can prevent sharp price gains — but that is not the current situation. "When apartment jeonse-to-sale price ratios are in the 30 to 40 percent range, the market is generally read as investment-driven rather than end-user-driven; at 60 to 70 percent, end users dominate," he said. "Right now, end users are the ones pushing prices up, which means sale prices have considerable room to rise further."
Meanwhile, the government has attributed the tightening jeonse supply, rising jeonse prices and climbing jeonse-to-sale price ratios to structural shifts in the lease market and a drop in ground-breaking activity caused by external shocks over the past several years.
The Ministry of Land, Infrastructure and Transport said the rise in jeonse and monthly rent prices was driven primarily by the project financing crisis in the real estate sector from 2022 to 2024 and the reduction in ground-breaking linked to the Russia-Ukraine war. The ministry also noted that the fallout from jeonse fraud has shifted tenant preferences toward wolse, contributing to a long-term structural change in the lease market in which jeonse arrangements are gradually giving way to monthly rent contracts.
hwshin@heraldcorp.com
