The number of ultra-high-end monthly rental contracts exceeding 10 million won has sharply increased. As liquidity flows into the market due to expectations of interest rate cuts and the KOSPI surpassing 4,000, the number of ultra-high-end monthly rental contracts is also gradually rising.

According to the Ministry of Land, Infrastructure and Transport’s real transaction price disclosure system on October 30, the number of apartment rental contracts in Seoul with monthly rents of 10 million won or more totaled 25 last month. This represents an increase of 4 contracts (19%) compared to the previous month’s 21 contracts. Even after the government implemented lending regulations in June, more than 20 high-value apartment monthly rental contracts of 10 million won or more have continued to be signed each month.

Last month, all ultra-high-end monthly rental transactions exceeding 10 million won were concentrated in Gangnam, Seocho, Yongsan, and Seongdong districts, where luxury apartments are located. In Seongsu-dong 1-ga, Seongdong-gu, a luxury residential-commercial complex apartment, Trimage, with an exclusive area of 84 square meters, was leased for a deposit of 100 million won and a monthly rent of 12 million won. In Hannam-dong, Yongsan-gu, Le Garden The Main Hannam, with an exclusive area of 222 square meters, was contracted for a deposit of 4 billion won and a monthly rent of 14 million won. For Hannam The Hill, a symbol of high-end housing in Hannam-dong, Yongsan-gu, an exclusive area of 233 square meters was leased for a deposit of 700 million won and a monthly rent of 23 million won. In Seobinggo-dong, Yongsan-gu, Arpe Han River, with an exclusive area of 242 square meters, was contracted for a deposit of 200 million won and a monthly rent of 24.5 million won.

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It has been confirmed that most high-value apartment monthly rental contracts are new contracts, meaning new tenants have been found. Of last month’s contracts, 21 were new, accounting for 84%. From June, when the government’s lending regulations began, to August, the proportion of new contracts for apartment rentals of 10 million won or more hovered around 75%, but last month it exceeded 80%. Both ultra-high-end monthly rental contracts exceeding 20 million won last month were 100% new contracts.

In contrast, the proportion of new contracts in the overall apartment monthly rental market last month was only 55%. The proportion of new contracts was 58.5% in June, but as the rate of contract renewals increased, it has since dropped by 3.5 percentage points.

The increase in demand for ultra-high-end monthly rentals is due to a growing trend of choosing to live on rent and investing capital elsewhere to grow wealth, rather than owning an apartment worth several billion won. Yoon Sumin, Real Estate Specialist at NH Nonghyup Bank, explained, "If we estimate the sale price of an apartment with a monthly rent of 10 million won at around 8 billion won, investing that amount to earn just 4% annually would yield 320 million won, which is more than enough to cover the annual rent of 120 million won." She added, "Among wealthy individuals, those who wish to use their capital for investments while paying monthly housing costs are seeking high-value rental apartments."

The main demand for ultra-high-end apartments comes from wealthy individuals with assets such as virtual assets, senior company executives, and celebrities. These are people with the ability to generate cash flow who can afford monthly rents of tens of millions of won without bank loans. As luxury apartments continue to be developed in the three Gangnam districts, Yongsan-gu, and Seongdong-gu, both the volume and price of ultra-high-end monthly rental transactions are expected to rise. In June, a new contract was signed for Galleria Foret in Seongdong-gu, with an exclusive area of 241 square meters, for a deposit of 100 million won and a monthly rent of 40 million won. Galleria Foret drew attention in 2008 for its record-high pre-sale price of 45.35 million won per 3.3 square meters and is known as the former residence of singer G-Dragon.

Yoon added, "Due to polarization, the number of high-priced apartments is increasing, and contracts involving high monthly rents are also expected to grow. This should be viewed as a completely separate market from the government’s real estate lending regulations."

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