A wave of rebuilding projects in Seoul's Songpa district is draining the local rental market, as residents of aging apartment complexes move out in succession. Three complexes are already relocating, and two more are set to begin next month, a shift expected to worsen conditions further. With relocation demand rapidly absorbing nearby jeonse (a lump-sum deposit lease) listings and pushing deposits sharply higher, a growing number of households are signing leases without even viewing the units.
Three rebuilding complexes in Songpa — Garak Samik Mansion, Garak Miryung and Samhwan Garak Apartment — are currently in their relocation periods, according to redevelopment industry sources on the 27th. Next month, Jamsil Woosung 4 and Hanyang 3 will begin moving out, and their association members are now searching for homes. The five complexes together comprise 2,826 households. Even accounting for the 936-unit Garak Samik Mansion, whose relocation is nearing completion, roughly 1,890 households are still looking for places to live.
As relocations accelerate, association members say they are feeling the steep rise in jeonse deposits firsthand. One Garak Samik Mansion member who moved to the Kumho apartment complex in Garak-dong in early August secured a jeonse lease on an 85-square-meter unit for 900 million won (about $650,000) in April or May. In January, new jeonse contracts for the same unit type had ranged from 580 million won to 770 million won. Asking prices have now climbed to 950 million won.
"I kept losing out on contracts while looking for a jeonse unit, and prices were rising so fast that I signed as soon as a listing appeared, without even seeing the inside of the home," the member said. "Deposits had jumped 100 million to 200 million won from the start of the year, so I felt rushed."
Listings are indeed shrinking while deposits climb. Songpa had 1,368 jeonse listings as of the 25th, down about 65% from 3,904 in February, according to real estate data provider Asil. The district's apartment jeonse price index was up 9.41% for the year as of the 21st, the Korea Real Estate Board said. That is 4.07 percentage points higher than the 5.34% cumulative gain over the same period a year earlier.
Association members unable to find homes nearby are turning to Gyeonggi Province. An official at the Samhwan Garak association, which began relocating late last month, said nearby supply has all but vanished because Garak Miryung is also moving out and large numbers are leaving Garak Samik Mansion. "Owners want to stay close by, but with no listings available, they have no choice but to move to outlying areas," the official said.
An official at a local brokerage said finding a jeonse home nearby has become difficult because rebuilding and remodeling projects are under way simultaneously across Garak-dong and Bangi-dong. "Closer options are Wirye New Town, Hanam and Guri, and some are moving as far as Dasan New Town in Namyangju," the official said.
Households seeking to stay in the same area for reasons such as their children's schooling frequently accept higher costs and switch to monthly rent with a deposit. "With so little jeonse available, some grit their teeth and sign deposit-plus-monthly-rent contracts," an official at the Garak Miryung association said. "Even those prices are rising so steeply that it is not an easy choice."
Concerns about the rental squeeze are also running high at Jamsil Woosung 4 and Hanyang 3, which begin relocating next month. An official at the Hanyang 3 association said that because surrounding complexes are also being rebuilt, households moving nearby would have to relocate a second time. "Most are looking for homes in Wirye New Town or Hanam," the official said.
Industry watchers expect the continuing relocations to affect the rental market in Gyeonggi Province as well as Songpa. "Even households from the Gangnam area are looking for relocation housing as far out as Gyeonggi Province, so this could ripple into the province's jeonse market," one redevelopment industry official said.
