[Practical Finance] Do You Live by Renting? I Buy by Renting... Subscription Strategies in a Rising Interest Rate Era

Financial Burden and High Home Price Perception
Increase in Jeonse and Monthly Rent Demand Over Buying
July Apartment Transactions at 21,836 Units
63% Decrease Compared to Same Month Last Year

Focus on Publicly Supported Private Rentals
Available to Anyone Aged 19 and Over
Rent Increase Limited to 5% Annually
Long-Term Residence Possible for Up to 8-10 Years

[Asia Economy Reporter Hwang Seoyul] As interest rate hikes increase financial burdens and the perception of apartment prices peaking continues, more buyers in the apartment market are choosing rental options over purchasing. Consequently, the subscription market is also seeing increased competition as attention shifts from new homes to rental housing. In particular, there is growing interest in public-supported private rental housing, which combines the advantages of public and private rentals by offering affordable rents with the construction capabilities of private developers.

With the apartment price rise slowing down this year and interest rates rising, demand is shifting towards renting rather than buying. According to the Ministry of Land, Infrastructure and Transport, the nationwide apartment sales volume in July was 21,836 transactions, down 22.4% from June (28,147 transactions) and down 63.2% compared to the same month last year (59,386 transactions). On the other hand, rental transactions, which carry less financial burden than buying, are on the rise. The nationwide apartment rental transaction volume in July was 98,572, showing a 2.0% increase compared to the same month last year. Seoul (67,203 transactions) saw an 11.9% increase compared to July last year.

As renting becomes more advantageous than buying, more demand is turning to public rental housing. Public rental housing is a system where the state, local governments, Korea Land & Housing Corporation (LH), local corporations, and public institutions provide various rental housing options to non-homeowners based on household income and asset levels. Since it is provided for housing stability, it offers the advantages of low rent and long-term residence. Announcements and detailed information about public rental housing can be found on the LH subscription center or local corporation subscription system websites such as Seoul Housing & Communities Corporation (SH).

According to LH, the average subscription competition rate for national rental housing supplied over the past year was 1.11 to 1, but the most recent statistics from May this year show an average competition rate of 2.08 to 1, nearly doubling. The average subscription competition rate in the metropolitan area was 4.22 to 1, 2.6 times higher than last year's annual average of 1.63 to 1. Happy Housing, which has less stringent income and asset requirements than national rental housing, recorded even higher competition rates. The average subscription competition rate for Happy Housing in May was 5.82 to 1, also higher than last year's average of 3.77 to 1.

However, since public rental housing has strict eligibility requirements and high entry barriers, some are turning their attention to public-supported private rental housing. Public-supported private rental housing is built by private developers with public support such as housing and urban funds and public land. It features reasonably low rents at 85-95% of the surrounding market price and the product quality of private housing.

Anyone aged 19 or older can apply for public-supported private rental housing without a subscription savings account. Additionally, rent increases are capped at 5% annually, and long-term residence of up to 8-10 years is possible, enhancing housing stability. Even if selected, maintaining non-homeowner status allows for future home purchase opportunities through subscription. Related announcements can be found on the Korea Real Estate Board's Subscription Home website or each complex's sales website.

According to the Korea Real Estate Board's Subscription Home, these advantages have led to high competition rates for public-supported private rental housing in this year's subscription market. In March, the public-supported private rental housing "Suwon Station Prugio The Smart (exclusive area 79.99㎡)" in Suwon, Gyeonggi Province, received 3,438 applications for 121 general supply units, resulting in an average competition rate of 28.41 to 1. In July, "Hillstate Gwanak New Forest (exclusive area 59㎡)" in Gwanak-gu, Seoul, recorded a competition rate of 87.64 to 1 with 8,852 applications for 101 general supply units.

This month, supply of public-supported private rental apartments continued. Daewoo Engineering & Construction's public-supported private rental apartment "Dongincheon Station Park Prugio" in Songnim-dong, Dong-gu, Incheon, accepted applications until the 7th. The apartment consists of 2,562 units from basement level 4 to ground level 48, with 2,005 units ranging from 21 to 84㎡ designated as public-supported private rental housing. On the same day, "Dongtan Station Place The Terrace" in Hwaseong, Gyeonggi Province, was also supplied. It is a complex of 166 units, from basement level 1 to ground level 4, with exclusive areas ranging from 94 to 117㎡. Woomi Construction will also supply "Paju Unjeong New Town Woomi Lin Center Foret" in Paju, Gyeonggi Province, later this month. This complex is a pre-construction sale with move-in scheduled for February 2023.

Additionally, there are eight public-supported private rental complexes scheduled for supply in the second half of the year (as of the 6th). According to Real Estate R114, in October, "Incheon Geomdan Hanshin The Hue (AB5)" in Seo-gu, Incheon, with a total of 910 units, will be supplied, and in November, two complexes "Yangju Jungheung S-Class (1BL·2BL)" in Yangju, Gyeonggi Province, are planned for sale. Other complexes awaiting supply in the second half of the year (dates undecided) include "Yangju Okjeong A19-2 Jeil Punggyeongchae" (1,304 units) in Yangju, Gyeonggi Province; "Hoam District Jeil Punggyeongchae" (874 units) in Chungju, Chungcheongbuk-do; and "Seongsan Samjeong Green Core Forest 2 Complex" (608 units) in Changwon, Gyeongsangnam-do, among five others.

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