Photo = Yonhap News As apartment rental prices across the country remain strong this year, ‘gap investment’ (an investment method of buying a house with a deposit) is on the rise in the southern metropolitan area and Chungcheong Province, including Hwaseong and Suwon in Gyeonggi province and Cheonan in South Chungcheong province. It is interpreted that expectations for favorable development factors such as the Seoul Metropolitan Rapid Transit (GTX) and the creation of a semiconductor cluster are reflected. In Seoul, where the difference between the selling price and the price of jeonse amounts to hundreds of millions of earnings, the share of gap investments has actually decreased even though jeonse prices have continued to rise for 49 weeks. There are also comments in the industry that it will be difficult for the demand for jeonse-related investments to continue as there are many variables such as delays in cutting interest rates and more policy uncertainty such as facilitating the work of rebuilding.
◆ Good news GTX… Active sales including leases in Hwaseong and Suwon
According to Asil, a real estate big data company, on the 28th, the area with the most gap investments over the past three months was Hwaseong, Gyeonggi Province (52 cases). This was followed by Gimhae, Gyeongnam (38 cases), Yeongtong-gu, Suwon, Gyeonggi Province (36 cases), Seobuk-gu, Cheonan, South Chungcheong Province (36 cases), and Seo-gu, Incheon (34 cases). Asil considers it a gap investment if you have sold an apartment in the last three months and entered into a lease or monthly rental contract without actually living in it.
On the 11th of last month, a unique 59㎡ area of ’Nechimi Village Jugong Complex 2′ in Byeongjeom-dong, Hwaseong was sold for 298 million won. A week later, a lease contract was signed for 268.29 million won. The difference between the sale price and the lease price was only about 30 million won. The exclusive use of 84㎡ of ‘Shindongtan Prugio’ in Gisan-dong, Hwaseong was traded for 346 million won in February, and then found a tenant for 300 million won on the same day.
In Suwon, transactions believed to be gap investments are happening one after the other. The sale price of only 73㎡ for ‘Yeongtong Edu Park’ in Yeongtong-dong, Yeongtong-gu, Suwon, last February, won 562 million. In the same month, a lease contract was signed for 495 million won. The apartment was bought for 65 million won.
Hwaseong and Suwon have something in common: they are GTX interest areas. The GTX-C route is set to end in Suwon, and Hwaseong was included in the C route extension plan announced earlier this year. Cheonan and Incheon Seo-gu, where many gap investments have taken place, also plan to open routes C and D, respectively. The analysis is that the metropolitan area, excluding Seoul, has attracted the attention of consumers because it is possible to invest with a relatively small amount. Kwon Il, head of the real estate information team, said, “The amount of initial investment in regions like Gyeonggi and Incheon is lower than in Seoul,” but added, “It is not clear how long the impact will last due to development favorable, and house prices can rise too much, so we need to be careful about investment.”
◆ Seoul is ‘quiet’ with a jeonse rate in the 40% range.
In Seoul, although jeonse prices have been on the rise for 49 weeks, the share of gap investments is actually lagging this year. Last January, gap investments accounted for 11% (555 cases) of all 4,643 apartment transactions in Seoul. After that, it recorded 7% in February and 4% in March.
The explanation is that although the lease price is strong, the lease rate (ratio of lease price to sales price) is only about 40%, which makes it difficult to activate gap investment. Typically, when the jeonse rate is high, the difference between the selling price and the jeonse price decreases, increasing the demand for gap investment. According to Real Estate R114, the rental rate for apartments in Seoul last month was 47.52%. There is no significant difference from a year ago (47.05%).
In 2019, the apartment rental rate in Seoul was in the 50% range as of January, but dropped to 49.96% in December of the same year. After that, it maintained the level of 49% and recovered to 50.46% in November 2020, showing a jeonse rate in the 50% range until 2021. Team Leader Kwon explained, “If the lease rate is around 40%, it very low level,” and “It’s a difficult time to aggressively make gap investments because the lease price is lower than in 2019 and 2020.”
It is analyzed that the demand for gap investments which aim to benefit from the market price has also decreased due to the general recession of the real estate market. As the timing of the interest rate cut is unclear and the wait-and-see attitude remains for house prices, the incentive to invest is weak except in some favorable regions. Soo-min Yoon, a real estate expert at Nonghyup Bank, said, “At one time, the national jeonse rate rose to the 70% range, so it was possible to buy an apartment with only 30% of the price of a house.” The financial burden is so great,” he said.
Reporter Han Myeong-hyeon
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