Housing costs for tenants in Seoul are climbing further ahead of the autumn moving season. The average monthly rent for homes in the capital has topped 1.3 million won for the first time since the data series began, and leases above 3 million won a month are spreading quickly even in Nowon, Dobong and Gangbuk — districts long regarded as relatively affordable.
Seoul Average Rent Hits 1.31 Million Won, First Time Above 1.3 Million
According to the nationwide housing price survey for August released by the Korea Real Estate Board on the 17th, the average monthly rent for all housing types in Seoul was 1.313 million won last month. The figure covers apartments, low-rise multi-unit housing and detached homes.
It is the first time the Seoul average has passed the 1.3 million won mark since the statistics began in July 2015.
The burden is heavier for apartments alone. The average monthly rent for a Seoul apartment was 1.641 million won last month, up 0.91% from the previous month.
Gains varied by district. Seongbuk led with a 1.85% rise over the month, followed by Geumcheon at 1.64% and Nowon at 1.57%.
Analysts say the rise is being driven by a shrinking supply of jeonse (a lump-sum deposit lease) units combined with rising jeonse prices, which is pushing existing jeonse demand into semi-jeonse (a partial deposit, partial monthly-rent arrangement) or monthly-rent contracts.
Nowon, Dobong, Gangbuk Also Hit 3 Million Won; High-Rent Deals Up 12-Fold in a Year
What stands out is the sharp increase in high-rent contracts in the so-called "No-Do-Gang" districts of Nowon, Dobong and Gangbuk, which have been seen as relatively cheap places to rent in Seoul.
Data from the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system show that from Jan. 1 through the 13th of this month, 12 apartment monthly-rent contracts signed in Nowon, Dobong and Gangbuk carried rent of 3 million won or more.
That compares with just one in the same period last year, a 12-fold increase in a year.
Gangbuk alone accounted for six contracts of 3 million won or more this year. Nowon rose to five from one a year earlier. Dobong recorded its first such contract this year after none last year.
The spread of high rents was not limited to the 3 million won range. For contracts of 2 million won or more, Nowon rose to 68 this year from 42 a year earlier. Over the same period, Gangbuk jumped more than fourfold to 69 from 15. Dobong rose to 19 from six.
Contracts of 1.5 million won or more followed a similar pattern. Nowon rose to 312 this year from 234, an increase of 78. Dobong nearly doubled to 113 from 60. Gangbuk rose to 188 from 127, up 61.
Jeonse Supply Shrinks as Rental Demand Piles Up
The property market is concerned that rising jeonse prices could again push monthly rents higher.
If more landlords move into homes they had been renting out in response to government changes to property taxation, the supply of jeonse and monthly-rent units could shrink further. Holding costs for landlords, including property taxes, may also be passed on to rents.
Analysts say that if a shortage of jeonse units pushes tenants into the semi-jeonse and monthly-rent markets, rental demand will rise and feed a supply-demand imbalance that drives rents up again.
Rising home prices combined with tighter lending rules are also cited as pressure on jeonse and monthly rents, as buyers who cannot purchase remain in the rental market.
Kwon Dae-joong, a chair professor of economics and real estate at Hansung University, said it will not be easy to resolve the strain in the jeonse and monthly-rent markets in the short term. "Not only sale prices but also jeonse and monthly rents are rising together, centered on the greater Seoul area, and that is increasing the housing cost burden on tenants," the professor said.
"With home prices up and lending rules tightened, demand that cannot buy a home has no choice but to stay in the rental market," the professor said. "Since jeonse and monthly rent are effectively the last housing ladder for people who do not own a home, policy measures are needed to ease the supply-demand imbalance in the rental market."
