Seoul's fastest jeonse rise since 2011 spreads into apartment prices outside Gangnam

Set the apartment jeonse figure next to the sale price and the relative cost of buying barely moved this year. Deposits on Seoul apartments rose 7.35% through August, the most since 2011 ^[3], only 0.17 percentage points behind the 7.52% sale-price gain on the figures Sedaily cites ^[3]. A tenant weighing a renewal against a purchase in August faced about the same deposit-to-price ratio as in January ^[3]. The push Sedaily's report describes, households without a home buying because they have run out of alternatives ^[16], has to come from the level and duration of lease costs.

Duration is what the lease data show most clearly. Monthly gains in Seoul apartment lease prices stayed below 0.3% through the first half of last year, climbed from October and ran above 1% a month from May to July ^[7]. The combined jeonse index ended August at 101.9, 0.3 points below its January 2022 record of 102.2 ^[8]. Passing it takes a rise of about 0.29% ^[4]. Apartment jeonse rose 0.95% in August alone ^[8].

The housing types that used to restrain costs have stopped doing so. For about eight years after the series began, monthly rents on low-rise multi-unit and detached homes averaged annual changes near zero; over the past two years they rose 8.01% and 5.98% ^[11]. The low-rise jeonse index reached 101.4 in August, 0.6 points above its 2022 peak ^[9][5].

The sale-price pattern fits the lease story and one other. Nam Hyuk-woo of the Woori Bank real estate research institute splits the market in two. "Prices for expensive apartments in Gangnam are turning lower because of tax changes and other factors, but prolonged instability in the lease market is putting upward pressure on home prices in Seoul and southern Gyeonggi Province," he said ^[17]. The competing reading is that tax changes pushed buyers out of Gangnam and into the outer districts. That would produce the same weekly gains in Nowon or Dobong. The report does not say whether recent buyers were previously renting.

I think the lease channel is the better explanation, on timing. The lease rise is 39 months old ^[6] and the Gangnam decline four to five weeks ^[14], so buyers leaving Gangnam can account for the latest few weeks of outer-district gains and not for the price run before them ^[7]. The view is wrong if buyer data show the recent purchases came mostly from people who already owned a home, or if outer-district prices keep climbing after lease gains cool.

The government has aimed its policy at curbing sale prices ^[1], and on Nam's account tax changes are working at the Gangnam end ^[17]. His prescription moves the target. "To stabilize home prices, easing instability in the lease market is the most urgent task," he said ^[18].