A citizen looks at a listing solicitation notice posted at a real estate agency. Yonhap News
As stricter residency requirements under the land transaction permit system reduced rental listings, and with new supply also falling short, four out of every 10 monthly rent contracts for Seoul apartments this year exceeded 1 million won per month.
According to the Ministry of Land, Infrastructure and Transport’s (MOLIT) real transaction price disclosure system on Tuesday, the share of monthly rent (wolse) in the rental market is rising, and high-priced monthly rent contracts of 1 million won or more are spreading beyond Gangnam to all of Seoul.
In the first half of this year, monthly rent accounted for 49.8% of Seoul apartment rental contracts, up about 6.7 percentage points from the first half of last year (43.1%). Conversely, the share of jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent) fell 6.7 percentage points from 56.9% to 50.2%, effectively narrowing the gap between the two. This is interpreted as the result of reduced jeonse loans combined with landlords’ growing preference for monthly rent.
By price range, the trend of declining mid- to low-priced monthly rents and rising high-priced ones is clear. In the first half of this year, contracts with monthly rent below 1 million won accounted for 58.4%, down 1.9 percentage points from the same period last year (60.3%). The range between 1 million won and 2 million won also fell 0.4 percentage points, from 24.8% to 24.4%.
By contrast, the range between 2 million won and 3 million won rose 0.9 percentage points, from 8.6% to 9.5%, and the range of 3 million won or more increased 1.3 percentage points, from 6.3% to 7.6%. As a result, monthly rent contracts of 1 million won or more totaled 41.6%, up 1.9 percentage points from the first half of last year (39.7%).
As monthly rent prices rise rapidly, ultra-high-priced monthly rent contracts exceeding 3 million won are now appearing not only in Gangnam but also in Gangbuk. In May, the 84-square-meter unit of ‘Hanwha Forena Mia’ in Mia-dong, Gangbuk-gu, was contracted at a 50 million won deposit and 3.1 million won monthly rent, setting a new high. The previous high was a 50 million won deposit and 3 million won monthly rent contracted in March.
The 84-square-meter unit of ‘Nowon Lotte Castle Signature’ in Sanggye-dong, Nowon-gu, was also newly contracted in March at a 150 million won deposit and 3 million won monthly rent.
In the Gangbuk area, where new supply is relatively scarce, monthly rents rose more steeply than in Gangnam. According to the Korea Real Estate Board, Seoul’s apartment monthly rent price index stood at 102.76 in May this year, up sharply from 96.16 in the same period last year. By region, Gangbuk rose from 96.49 to 103.32, while Gangnam rose from 95.87 to 102.28.
Indeed, the 46-square-meter unit of ‘Byeoksan Apartment’ in Sanggye-dong, Nowon-gu, was newly contracted last month at a 30 million won deposit and 1 million won monthly rent, marking the first time the complex’s 46-square-meter unit type surpassed 1 million won in monthly rent. Compared with the 20 million won deposit and 900,000 won monthly rent contract signed at the end of May, the deposit jumped 10 million won and the monthly rent rose 100,000 won in two months.
The 84-square-meter unit of ‘SK Bukhansan City’ in Mia-dong, Gangbuk-gu, was also newly contracted last month at a 50 million won deposit and 2 million won monthly rent. Compared with the same unit type traded in April at a 50 million won deposit and 1.65 million won monthly rent, the monthly rent alone rose 350,000 won in two months.
The shift from jeonse to monthly rent and the increase in high-priced monthly rents are not unrelated to the decline in rental listings. According to real estate big data firm Asil, Seoul apartment monthly rent listings currently number 16,799, down 21.37% from the beginning of this year (21,364).
“A decline in move-in supply, an increase in renewal contracts, and the passing on of tax burdens are exerting a combined effect,” said Ham Young-jin, head of the real estate research lab at Woori Bank. “As the shift from jeonse to monthly rent proceeds and monthly rent listings increase, tenants’ bargaining power should rise, but with absolute volume low and the renewal ratio also rising, jeonse and monthly rent prices are climbing simultaneously.”