The Share of Monthly Rent Transactions for Small Apartments in Seoul Increased by 12%p in 5 Years

Higher Jeonse-to-Jeonse Conversion Rate in Small Units Leads to Greater Monthly Rent Burden per Area Compared to Medium and Large Units

[Asia Economy Reporter Yuri Kim] This year, the number of monthly rent transactions for small apartments in Seoul has reached the highest level in the past five years.

According to Real Estate 114's analysis on the 26th of the Seoul apartment monthly rent transaction data from the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system, out of 28,108 monthly rent transactions recorded until July this year, 16,748 were for small apartments with an exclusive area of 60㎡ or less. Although the total monthly rent transaction volume decreased compared to 31,450 transactions in 2016, the number of small apartment transactions increased by more than 1,500.

The proportion of monthly rent transactions for small apartments has also steadily increased. The share of monthly rent transactions for small apartments of 60㎡ or less was 59.6% until July this year, up 11.8 percentage points from 47.8% in 2016, five years ago. In contrast, both the transaction share and number of transactions decreased in the 60~85㎡ and over 85㎡ size ranges during the same period. Notably, the decline in transactions was most significant in the 60~85㎡ range.

Real Estate 114 cited the reasons for the increase in the share of monthly rent transactions for small apartments as follows: ▲ the demand for small apartments has increased because 1-2 person households in Seoul account for 57% of all households (Statistics Korea, 2018 data) ▲ the recent increase in the supply of small apartments. Additionally, considering the significant decrease in the monthly rent transaction share in the 60~85㎡ range, it is possible that some tenant households downsized their living space due to increased rental burdens accompanying rising housing prices.

Although the monthly rent for small apartments is lower than that for medium and large apartments, the monthly rent burden relative to the area is higher. This is because small apartments have a higher jeonse-to-monthly rent conversion rate (Korea Real Estate Board, June 2020 standard, 4.2%) compared to medium and large apartments. The jeonse-to-monthly rent conversion rate is the rate applied when converting a jeonse deposit to monthly rent; a higher rate means a relatively greater monthly rent burden compared to jeonse. Kyunghee Yeo, Senior Researcher at Real Estate 114, said, "Due to the implementation of the rent ceiling system and other regulations, there are restrictions on rent increases, and from October, the jeonse-to-monthly rent conversion rate will be lowered from 4% to 2.5%, which will reduce the monthly rent burden for existing contract holders." However, she added, "Given the low interest rate environment, the conversion from jeonse to monthly rent is expected to continue, so supplementary measures are needed for new monthly rent contract holders."

This content was produced with the assistance of AI translation services.