“Still far from the bottom”… Seoul villa lease prices heading to ‘worst’

The number of single-family and multi-family housing lease transactions registered in the Ministry of Land, Infrastructure and Transport’s real transaction price system in May was 2,777, down about 16% from 3,309 in the same period last year and nearly half compared to 5,125 in 2022. The proportion of monthly lease transactions for townhouses and multi-family homes, which accounted for more than half at 64.15% in 2022, also fell by 49.28% in May this year.

Compared to apartments, villas, which have relatively low jeonse prices, have been popular among young people and other people with limited financial resources. However, due to jeonse frauds that have occurred in villas in recent years, the number of transactions has decreased. This is because existing villa jeonse buyers have moved to apartments that are more expensive but relatively safe from jeonse frauds, and the demand for villas has plummeted.

As jeonse transactions are slowing down, the number of rental transactions, including jeonse and monthly rent, is also on a downward curve. The number of single-family and multi-family transactions in Seoul decreased from 15,487 in 2022 to 12,153 last year, and is threatening to reach 10,000 transactions this year at 10,465. The monthly transaction volume of other non-apartment housing, such as townhouses and multi-family housing, also decreased from 12,816 in May 2022 to 11,001 in May this year.

As the aversion to multi-generational and multi-family housing continues, the number of villa permits and construction starts has also plummeted. This is because in the villa market, where there are more buyers who buy houses for rental income than apartments, rental transactions have decreased, and demand for expensive new villas has also decreased.

According to the Ministry of Land, Infrastructure and Transport, the number of non-apartments (villas, officetels, etc.) that received permits as of May was 15,313, down 35.8% from the previous year, and the number of construction starts was 14,646, down 26.7% from the same period last year. The number of completed units also decreased by 39.2% from the previous year to 18,073, rapidly decreasing the number of non-apartments on the market.

The industry is concerned that non-apartments, which have a shorter construction period than apartments, will be more quickly affected by the supply drought. There are also concerns that if the housing supply drought continues for a long time, the housing cost burden on buyers will increase, which could cause the housing ladder for ordinary citizens to collapse.

Kwon Dae-jung, a professor of real estate studies at Sogang University's Graduate School of General Studies, explained, "As many jeonse fraud cases have occurred, especially in non-apartments, the proportion of jeonse and monthly rent is increasing compared to jeonse in non-apartments." He added, "If the supply of Ville Apartments, which are housing for the common people, decreases, the housing stability of the common people could become unstable."