Jeonse-to-sale ratios in Seoul's outer districts near Moon-era highs, stoking price fears

Jeonse-to-sale price ratios — the proportion of a unit's jeonse deposit relative to its sale price — for apartments 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 seen during the Moon Jae-in administration, when jeonse prices rose sharply, as lease prices continue to rise amid land transaction permit regulations and a shortage of housing supply. With jeonse prices — which act as a floor for sale prices — continuing to climb, upward pressure on apartment prices is also intensifying.

According to KB Real Estate data released Friday, <style ref="s0">Gangbuk-gu's apartment jeonse-to-sale ratio stood at 63.48 percent in May, the highest since December 2019 (63.57 percent) — a gap of six years and five months.</style> <style ref="s1">Nowon-gu also posted 55.57 percent, its highest since April 2020 (55.65 percent),</style> while <style ref="s2">Dobong-gu crossed the 60 percent threshold at 60.02 percent, the first time since January 2020 (60.30 percent) — a span of six years and four months.</style>

Beyond the three northern districts, other outer-ring districts 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 rising ratios reflect a surge in owner-occupier demand for mid-to-low-priced areas, where sale prices are relatively lower than in other districts, thinning the supply of rental listings and pushing prices up sharply. As of Friday, jeonse listings for apartments in Gangbuk-gu numbered just 77 — down 44 percent from 138 six months ago. Nowon-gu saw listings plunge 63 percent over the same period, from 697 to 248, while Dobong-gu fell 49 percent, from 339 to 174.

Song Seung-hyun, chief executive of Urban Economy, said outer Seoul districts such as Nowon, Dobong and Gangbuk see a high share of purchases below 1 billion won ($723,000), meaning buyers tend to move in themselves, and as existing tenants vacate, a shortage of jeonse and wolse supply is emerging. "In addition, many residents in these areas have relatively lower incomes compared to major districts, so some stay in jeonse or wolse rather than buying — which concentrates rental demand," he said.

<style ref="s3">The concern is that rising jeonse-to-sale ratios act as an upward driver for sale prices.</style> Industry practitioners generally regard a ratio of 60 to 70 percent as the threshold at which jeonse price gains begin to translate into sale price increases.

Song said that even when jeonse-to-sale ratios rise, ample listings can prevent sharp price increases — but listings are now in outright short supply. <style ref="s4">"Generally, a jeonse-to-sale ratio of 30 to 40 percent signals a market driven more by investment demand than end-user demand, while 60 to 70 percent signals a market dominated by end users. Right now, end users are the ones pushing prices up, which means sale prices have significant room to rise further,"</style> he said.

Yoon Su-min, a real estate specialist at NH NongHyup Bank, offered a note of caution, saying that because gap investment — buying a unit with an existing jeonse tenant — is currently not viable in Seoul, rising jeonse-to-sale ratios may not feed as directly into sale prices as they once did. Still, he added, "the more affordable mid-to-low-price areas where end users can realistically buy tend to have fewer listings, so the lease market there is bound to react more sensitively."

Meanwhile, the government attributes the widening shortage of jeonse listings and the rise in jeonse prices and ratios to structural shifts in the lease market and a decline in housing ground-breakings 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 stems primarily from the real estate project financing crisis of 2022 to 2024 and a drop in ground-breakings linked to the Russia-Ukraine war. It also cited a long-term structural shift in the lease market — driven partly by jeonse fraud — in which tenants increasingly prefer wolse over jeonse, accelerating the conversion of jeonse units to monthly rent arrangements.

The ministry added that it is actively working to prevent reckless gap investment that exploits the jeonse system, to improve stability in the jeonse market, and to stabilize housing conditions for ordinary residents. "We will concentrate our efforts on expanding supply in the near term," it said.

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