More rental contracts signed as property prices increase
Rising property prices have led more people to rent by the month.
This year as of Nov. 20, 56,169 monthly rental transactions were recorded in Seoul, according to the Seoul Metropolitan Government. That is more than the 54,965 in the same period in 2020.
The total is around 36.4 percent of all lease contracts signed in Seoul, compared with 27.9 percent in 2019 and 30.8 percent in 2020.
In Geumcheon District, southern Seoul, 2,018 monthly rent transactions were signed through Nov. 20. In the January to November period 2020, 504 deals were recorded in that area.
Of 25 districts in Seoul, Geumcheon District was the only area where the number of monthly rent transitions was higher than the number of jeonse lump-sum long-term deposit lease contracts. About 59.1 percent of the lease deals were for monthly rents there in the year through Nov. 20.
This has been attributed to the government trying to stabilize real estate prices last year with a series of real estate market measures. As the government charged higher real estate taxes to owners of multiple homes, more landlords have been switching their jeonse properties to properties with monthly rent in order to generate steady cash flow.
This caused a shortage of jeonse properties in the market, which led to the rise in prices. Tenants who can’t afford the high jeonse prices have no choice but to choose an apartment with monthly rent.
Strengthened regulations on jeonse loans are also a contributing factor. The Korean government tightened the restrictions on the loans in an effort to slow the growth of household debt.
“There is always demand, but it’s now getting way more difficult for people to purchase a property, as well as to get jeonse loans. So they are moving to monthly rentals,” Lee Eun-hyung, a senior researcher at Korea Research Institute for Construction Policy, said. “The demand for monthly rent will likely rise further if the situation continues, as landlords who face heavy comprehensive real estate tax bills will increase the prices of monthly rents in order to generate cash.”
The situation is getting worse, as monthly rents are going up.
The average monthly rent in Seoul was 1.23 million won ($1,034) in October, up 10.2 percent compared to same month a year earlier.
Rent on a 59-square-meter (635-square-foot) flat in the Lotte Castle Gold Park apartment complex in Geumcheon District, which was about 900,000 won in January, is now 1.6 million won, up 77 percent in eight months.
BY SARAH CHEA, KIM DOO-HYEON [email@example.com]