“I was planning to buy a condominium when my lease was up, but my landlord said he would return 200 million won of my security deposit, and the price of housing has gone up a lot.”
Mr. Park Mo, 38, an office worker living in a new apartment in Gwacheon, Gyeonggi Province, recently received an offer from his landlord to return 200 million won of his deposit or give him 800,000 won in back rent if he renews his contract. “I don’t know if I should buy a house before prices rise further, or wait for another flash sale,” he said.
As home prices show signs of recovery, with the proportion of upwardly mobile transactions in Seoul surpassing the number of downwardly mobile transactions for the first time in a year, the math for actual buyers looking to buy a home is complicated. If the rental market remains weak and you continue to rent, you can save on housing costs. On the other hand, there is also a movement to buy a house before prices rise further.
Rising transactions outpace declines for the first time in a year
According to real estate platform Jibang, there were a total of 1016 apartment transactions in Seoul last month, accounting for 46.1 percent of the total number of transactions (2204). There were 871 (39.5%) downward transactions, where the price dropped by more than 1%. This is the first time since April of last year that the share of upwardly mobile transactions has exceeded the share of downwardly mobile transactions. The share of rising transactions has been rising for five months after falling to 20 percent in November last year. The share of trades with a price increase of 5% or more in Seoul last month was also 21.7%. It was the first time in 10 months since June last year that the share of transactions that rose by more than 5 percent.
The neighborhood with the highest number of rising transactions was Songpa-gu (94). It was followed by Gangdong-gu (91), Nowon-gu (85), Seongbuk-gu (63), and Gangnam-gu (56). According to the Ministry of Land, Infrastructure, and Transport’s real estate transaction price disclosure system, the sale price of an 84-square-meter unit for Helio City in Garak-dong, Songpa-gu, jumped by 270 million won to 1.9 billion won this month from 1.63 billion won in January. An 84-square-meter unit at Hillstate Gangdong Riverview in Amsa-dong, Gangdong-gu, which sold for 1.1 billion won in February, changed hands for 1.28 billion won in April, up 180 million won.
“After the regulatory hurdles were lowered at the beginning of the year and the burden of loan interest was eased, the price and actual transaction price are rising at the same time as the rush sales are digested,” said Ham Young-jin, head of Jibang Big Data Lab.
○Contract after contract with lower rental deposits
Unlike the sales market, where the mood has reversed, the rental market is still frozen. According to Real Estate R114’s analysis of MOLIT’s actual transaction price data, of the 4004 rental renewal contracts for apartments in the Seoul metropolitan area signed this month, 1713 (42.8%) were ‘reduction contracts’ with lower security deposits. This means that 4 out of every 10 apartment lease renewals in the metropolitan area were for lower security deposits.
The average amount of security deposit returned by the landlord in a reduced renewal is 100 million won. The average renewal deposit for 16,275 apartments in the Seoul metropolitan area that were renewed this year was 447.5 million won. This is a decrease of 94.1 million won from 541.6 million won.
By region, Seoul saw the largest decrease at KRW 180.3 million 스포츠토토(from KRW 697.86 million to KRW 579.83 million). Gyeonggi was 80.27 million won (457.46 million won to 371.19 million won) and Incheon was 70.45 million won (349.92 million won to 279.47 million won).
In some areas, such as Gangnam in Seoul and Bundang and Hanam in Seongnam in Gyeonggi Province, there were many deals that lowered the deposit by more than 300 million won. The exclusive 186㎡ of ‘Park Town Lotte’ in Sunae-dong, Bundang-gu, Seongnam was contracted for KRW 950 million, which is KRW 450 million lower than the deposit (KRW 1.4 billion) two years ago. A 145-square-meter charter for ‘i-Park Bundang 2’ in Jeong-dong was also contracted for 1.13 billion won, down 270 million won from 1.4 billion won two years ago.
Experts advised that as there are many variables that will affect the market, such as interest rates and sublet prices, it is worth considering staying in the charter market and aiming for a quick sale rather than a hasty chase.
“The recent recovery was largely driven by price increases in some areas and complexes, so we need to wait and see,” said Yeo Kyung-hee, an expert at Real Estate R114. “If you are a real buyer who can take advantage of a special mortgage loan, it’s worth looking to buy in the second half of the year.”