High jeonse prices make mothers buy homes in Daechi-dong for education

Kim, a 40-something working mother in Oksu-dong in Seoul’s Seongdong district, decided to buy a unit at new ‘Raemian Daechi Cheongchil Apartment Complex’ in Daechi-dong, Gangnam district, which will be completed in September. Originally, she planned to move to Daechi-dong by renting a jeonse home (rental home with lump sum key deposit) that entails relatively less financial burden, but instead she chose to outright buy a unit as jeonse price surpassed 1 billion won (866,000 US dollars).

“The apartment unit costs about 1.5 billion won (1.3 million dollars), and jeonse price soared to hit 1.2 billion won (1.04 million dollars) to 1.3 billion won (1.17 million dollars) per apartment unit, and I judged it would be better to buy one by making bank loans,” Kim said. “Others may ask me why I want to overspend beyond my affordability, but since the area is filled with quality hagwon (cram schools), I have decided to buy, rather than rent in Daechi-dong.”

As the era of low interest rate continues amid dearth of jeonse homes, the map of real estate investment in Gangnam, Seoul is changing. As Jeonse prices in Daechi-dong, the flagship area famous for high demand for ‘good schools,’ have almost reached the level of purchase price of homes, and new apartment complexes are being constructed in the area, a growing number of people are opting to buy a unit there. The trend is also fueled by expectations that home prices will increase in the area because more aged apartment complexes are set to undergo reconstruction in coming years. Also, monthly rental homes in Banpo-dong, which offer convenient access to cram schools in Daechi-dong through shuttle busses, are also drawing keen attention as an emerging trend from people seeking good educational environment for their children.

○ People choosing to buy homes to pursue good schools

According to realty industry sources on Tuesday, apartment units in Daechi-dong are being more robustly traded in recent weeks. Because homes are so highly priced in the Daechi-dong area, the volume of traded homes has not grown as significantly as in other areas such as Gangbuk district, but trading is getting robust when compared with the past several years when transactions of homes were sluggish, according to realtors. A source at a certificated realtor in the Daechi-dong area said, “The trading volume of apartment units this year increased about 20 to 30 percent from the same month of last year,” adding, “As jeonse home supply is extremely low, people who seek to actually reside in those units are buying homes by making bank loans.”

According to Seoul Realty Information Plaza, the volume of apartment units traded in Daechi-dong in this year’s first half (January - June) jumped 68.8 percent from the corresponding period of 2011, or four years ago. As home transactions have increased in volume, actual sale prices of homes at major apartment complexes in Daechi-dong are also on the rise.