Gap Investment Hwaseong and Suwon ‘wiggle’ Seoul is ‘quiet’
As apartment rental prices across the country continue to remain strong this year, ‘gap investment’ (an investment method of purchasing 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 sale price and jeonse price amounts to hundreds of millions of won, the proportion of gap investments has actually decreased even though jeonse prices have continued to rise for 49 weeks. There are also observations in the industry that it will be difficult for investment demand related to jeonse to continue as there are many variables such as delayed interest rate cuts and increased policy uncertainty such as easing reconstruction.
◆GTX good news… 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 past three months and entered into a lease or monthly rent contract without actually living in it.
On the 11th of last month, the 59㎡ exclusive 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 84㎡ exclusive use 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 presumed to be gap investments are taking place one after another. The sale price of 73㎡ exclusively for ‘Yeongtong Edu Park’ in Yeongtong-dong, Yeongtong-gu, Suwon, sold last February was 562 million won. In the same month, a lease contract was signed for 495 million won. It’s like buying an apartment for 65 million won.
Both Hwaseong and Suwon have something in common: they are GTX benefit areas. The GTX-C route is scheduled to stop 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 occurred, are also planning to open C and D routes, respectively. The analysis is that the metropolitan area, excluding Seoul, attracted the attention of consumers because it was possible to invest with a relatively small amount. Kwon Il, head of the real estate information team, said, “The initial investment amount in regions such as Gyeonggi and Incheon is lower than in Seoul,” but added, “It is unclear how long the effect will last due to favorable development, and house prices may rise excessively, so we need to be cautious about investment.” advised.
◆ Seoul is ‘quiet’ with jeonse rate in the 40% range
In Seoul, even though jeonse prices have continued to rise for 49 weeks, the proportion of gap investments has actually been lagging this year. Last January, gap investments accounted for 11% (555 cases) of all 4,643 apartment transactions in Seoul. Afterwards, 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 around 40%, making it difficult to activate gap investment. Typically, when the jeonse rate is high, the difference between the sale price and the jeonse price decreases, increasing gap investment demand. According to Real Estate R114, the rent rate for apartments in Seoul last month was 47.52%. There is not much difference from a year ago (47.05%).
In 2019, the apartment rental rate in Seoul was in the 50% range from January, but fell to 49.96% in December of the same year. Afterwards, 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 is a very low level,” and “It is a difficult time to make gap investments aggressively because the lease price is lower than in 2019 and 2020.”
It is analyzed that the demand for gap investments aimed at profiting from market price has also decreased due to the overall real estate market recession. As the timing of the interest rate cut is unclear and the wait-and-see attitude continues for housing 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 soared to the 70% range, so it was possible to buy an apartment with only 30% of the house price.” “The financial burden is so great,” he said.
Reporter Han Myeong-hyeon
