[비즈한국] The real estate market is trapped in a thick fog. Due to a fierce tug-of-war between buyers and sellers, trading volume has plummeted to record lows. Market participants are anxious. Yesterday, there were reports of record-high prices; today, news surfaces about an accumulation of urgent distressed sales. Where exactly is the market heading?
Many people habitually monitor trends in 'sales prices.' They look at KB market data or weekly trends from the Korea Real Estate Board, oscillating between joy and sorrow by saying, "It’s an upturn because it rose 0.05% this week," or "It’s a downturn because it fell 0.03%." However, I assert that in a situation where trading volume has dried up like now, discussing the fluctuations in sales prices is not only meaningless but even dangerous.
The average sales price we see now is highly likely a 'statistical illusion.' An average derived when the population (trading volume) is insufficient dances to the tune of even a single extreme outlier. Can one urgent distressed sale by a desperate homeowner represent the market value of that entire complex? Conversely, does one record-high transaction in a prime building on a prime floor signify a rebound for the entire market? No. It is merely an individual 'event,' not a market 'trend.'
Then what should we look at? If you don't want to get lost in the fog, you need a steady compass. The compass in the real estate market is exactly the 'Jeonse price.' With speculative demand completely removed, the Jeonse price—determined solely by the utility value of 'residence'—is the only metric that can gauge the floor and ceiling of the current market.
Why 'Jeonse' now? The difference between imaginary and real numbers
Real estate prices consist largely of the sum of two values. One is 'use value,' which is the utility gained from living in the home, and the other is 'investment value,' which reflects the expectation that the price will rise in the future.
※Sales Price = Use Value (Jeonse) + Investment Value (Premium)
In an upturn, investment value (premium) becomes bloated. The expectation that "it will rise further if I buy now" pushes prices up. However, in a downturn, adjustment phase, or a period of heavy wait-and-see sentiment like the present, this bubble bursts. When investment sentiment shrinks, sales prices drift like a kite in the air without direction. Once buyers disappear, asking prices become meaningless.
On the other hand, Jeonse prices are strictly in the realm of 'real numbers.' While one can perform gap investment by including a Jeonse contract, no one obtains a Jeonse for speculative purposes. Jeonse is the point where the supply and demand of people who need a space to rest their bodies tonight meet intensely. No matter how bad the economy is, people need a home. The more afraid people are to buy, the more the public chooses Jeonse or monthly rent over buying.
A paradox arises at this point. When the sales market freezes and people are unwilling to buy homes, that demand flows intact into the rental market. Even when sales transactions stop, Jeonse transactions occur steadily. In other words, in terms of data reliability, Jeonse prices currently provide a much richer sample and a more accurate direction than sales prices.
Therefore, the major premise for judging the market now is this: 'Even if sales prices fall, if Jeonse prices hold or rise, that market will not collapse. Conversely, even if sales prices hold, if Jeonse prices are collapsing, that market will soon crumble.'
The signals sent by Jeonse—'downward rigidity' and 'upward pressure'
One must understand the specific mechanism by which Jeonse prices serve as a benchmark for judging the market. The key is the change in the Jeonse-to-price ratio (the ratio of Jeonse price to sales price).
First, the securing of downward rigidity, or 'bottoming out.'
Even during a real estate downturn, complexes where Jeonse prices are firmly supported have good price defensiveness. When a sales price falls and nears the Jeonse price, a 'floor' is formed that is difficult to drop below. Think from the perspective of a homeowner. A 500 million won apartment has a Jeonse price of 450 million won. Even if they have to sell urgently, there is almost no money left after returning the Jeonse deposit. They would rather choose to hold on. Furthermore, from the perspective of an end-user, if the gap between the sales price and the Jeonse price is only 50 million won, conversion demand occurs, with people thinking, "I might as well buy it for this money." The Jeonse price acts as a breakwater preventing the decline of sales prices.
Second, the power to push up sales prices, or 'accumulation of upward energy.'
Furthermore, an increase in Jeonse prices is a leading indicator of an increase in sales prices. If Jeonse supply is insufficient and Jeonse prices continue to rise, tenants feel fatigue. Once the stress of increasing deposits every two years, moving costs, and residential instability reach a tipping point, tenants turn into buyers. Also, as the gap narrows, the barrier to entry for investors is lowered. The Jeonse price begins to push the sales price up from below.
In a period like now, when trading volume is dry, the data we must focus on is clear. Although volume is low, are Jeonse asking prices steadily rising? Are Jeonse listings being exhausted quickly rather than accumulating? Is the scarcity of Jeonse being highlighted as the monthly rent conversion rate increases? Regions that satisfy these conditions are places where energy is boiling beneath the surface, even if sales prices appear stagnant on the outside.
'Data' overcomes fear
When market sentiment is grim, the public does not move. The lack of trading volume means everyone is watching each other. However, history repeats itself. When everyone else is standing still, those who moved half a step ahead of others climbed the ladder of wealth.
What you need to do now is turn on your smartphone and open Naver Real Estate or Hogangnono. Then, click on the 'Jeonse price trend' graph of the complex you are interested in, not the 'sales price' graph. Is the sales graph moving sideways or declining, while the Jeonse graph is trending upward and closing the gap? Has the number of Jeonse listings dropped to single digits?
That is the land of opportunity. Do not be fooled by the trap of averages and become pessimistic about the entire market. Sales prices may lie, but Jeonse prices do not. Now is the time to find the solid bedrock of Jeonse hidden behind flashy asking prices and prepare for the coming wave of appreciation. If you wait until trading volume explodes and sales prices start to soar, it will already be too late.
If you want to keep your balance in a volatile market, remember: Where Jeonse prices rise, there is a path.
Kim Hak-ryeol, director of the Smart Tube Real Estate Research Institute and famous by the pen name 'Pashong,' previously served as a team leader at the Real Estate Research Division of Korea Gallup. He operates the Naver blog 'Pashong's World Exploration' and runs the YouTube channel 'StuTV.' His books include 'A New Guide to South Korean Real Estate (2025),' 'The Power of Gyeonggi-do Real Estate (2024),' 'Absolute Principles of Seoul Real Estate (2023),' 'The Future of Incheon Real Estate (2022),' 'Kim Hak-ryeol's Absolute Principles of Real Estate Investment (2022),' 'Future Map of South Korean Real Estate (2021),' and 'From Now On, Only Places That Will Rise, Rise (2020).'