Four out of every 10 monthly rent contracts for apartments signed in Seoul this year involved rents of 1 million won or more, data showed. As the share of monthly rent in the rental market grows, high-priced monthly rent contracts of 1 million won or more are spreading beyond Gangnam across all of Seoul. The trend stems from a decline in rental listings, as land transaction permit rules have strengthened owner-occupancy requirements, coupled with a shortage of new supply.
According to the Ministry of Land, Infrastructure and Transport's (MOLIT) real transaction price disclosure system on Sunday, the share of monthly rent among Seoul apartment rental contracts in the first half of this year was 49.8%, up about 6.7 percentage points from the first half of last year (43.1%). By contrast, 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%, narrowing the gap between jeonse and monthly rent to virtually similar levels. The shift is attributed to a combination of reduced jeonse loans and landlords' growing preference for monthly rent.
The trend of declining mid- to low-priced monthly rent and rising high-priced monthly rent is also clear. In the first half of this year, the share of contracts with monthly rent below 1 million won was 58.4%, down 1.9 percentage points from the same period last year (60.3%). The share of contracts between 1 million won and 2 million won also fell 0.4 percentage points, from 24.8% to 24.4%. By contrast, contracts between 2 million won and 3 million won rose 0.9 percentage points, from 8.6% to 9.5%. Contracts of 3 million won or more increased 1.3 percentage points, from 6.3% to 7.6%. The share of 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 rents rise rapidly, ultra-high monthly rent contracts exceeding 3 million won are appearing not only in Gangnam but also in Gangbuk. In May, an 84-square-meter unit at Hanwha Forena Mia in Mia-dong, Gangbuk-gu, was contracted with a deposit of 50 million won and monthly rent of 3.1 million won, setting a record high. The previous record was a deposit of 50 million won and monthly rent of 3 million won, signed in March. An 84-square-meter unit at Nowon Lotte Castle Signature in Sanggye-dong, Nowon-gu, was also newly contracted in March with a deposit of 150 million won and monthly rent of 3 million won.
The rise in monthly rent in Gangbuk, where new supply is relatively scarce, was steeper than in Gangnam. According to the Korea Real Estate Board, the Seoul apartment monthly rent price index in May this year was 102.76, up significantly from the same period last year (96.16). By region, Gangbuk rose from 96.49 to 103.32, while Gangnam rose from 95.87 to 102.28.
In fact, a 46-square-meter unit at Byeoksan Apartment in Sanggye-dong, Nowon-gu, was newly contracted last month with a deposit of 30 million won and monthly rent of 1 million won. It was the first time the monthly rent for the 46-square-meter unit type in the complex exceeded 1 million won. Compared with a contract signed in late May with a deposit of 20 million won and monthly rent of 900,000 won, the deposit rose 10 million won and the monthly rent rose 100,000 won. An 84-square-meter unit at SK Bukhansan City in Mia-dong, Gangbuk-gu, was also newly contracted last month with a deposit of 50 million won and monthly rent of 2 million won. Compared with a transaction in April for the same unit type at a deposit of 50 million won and monthly rent of 1.65 million won, the monthly rent rose 350,000 won in two months.
The shift from jeonse to monthly rent and the increase in high-priced monthly rent are not unrelated to the decline in rental listings. According to real estate big data firm Asil, Seoul apartment monthly rent listings totaled 16,799, down 21.37% from the start of this year (21,364).
Ham Young-jin, head of Woori Bank's real estate research lab, said, "A decline in move-in volume, an increase in renewal contracts, and the passing on of tax burdens are having a combined effect." He added, "As the shift from jeonse to monthly rent progresses and monthly rent listings increase, tenants' bargaining power should rise, but because the absolute volume is small and the renewal ratio is also rising, jeonse and monthly rent prices are climbing simultaneously."
