Is Living in Cheap Monthly Rentals a Thing of the Past? ... Surge in High-Priced Monthly Rents Exceeding 5.4 Million Won Salary

2432 Monthly Rent Contracts Over 3 Million Won Signed in Seoul from January to September
Rising Interest Rates Increase Jeonse Loan Burden... Landlords Prefer Monthly Rent Over Market Gains

[Asia Economy Intern Reporter Lee Gyehwa] High-priced monthly rent transactions exceeding 3 million KRW per month are rapidly increasing in Seoul. This is because the number of tenants burdened by interest on jeonse (key money deposit) loans due to the sharp rise in interest rates is increasing, and landlords prefer monthly rent over capital gains as house prices fall due to the real estate transaction freeze. According to Real Estate R114 on the 14th, the number of monthly rent transactions exceeding 3 million KRW among housing lease transactions with monthly rent in Seoul from January to September this year totaled 2,432 cases (based on contract date). This figure has more than tripled compared to 781 cases during the same period in 2020.

The number of monthly rent transactions increased even more steeply in the high-priced rent category. Monthly rents under 1 million KRW, which were 32,178 cases in 2020, increased to 40,926 cases in 2021 and 46,853 cases this year, a 45.6% increase over two years. Transactions with monthly rent exceeding 1 million KRW up to 2 million KRW rose from 8,499 cases in 2020 to 11,112 cases last year and 14,632 cases this year, a 72.16% increase over two years. Monthly rents exceeding 2 million KRW up to 3 million KRW surged 137.95% over the past two years, from 1,523 cases in 2020 to 2,814 cases last year and 3,624 cases this year.

In the Gangnam 3 districts, the increase in monthly rent was even greater, especially for large-sized units. In July this year, a 124㎡ unit in Resence, Songpa-gu, was traded with a deposit of 250 million KRW and a monthly rent of 5.4 million KRW. Although monthly rents had previously reached the 4 million KRW range, this is the first time they have exceeded 5 million KRW.

High-priced monthly rents, which had been mainly seen in the Gangnam 3 districts, have also surged in non-Gangnam areas this year. In Gwangjin-gu, an 84㎡ unit in e-Pyeonhansesang Gwangjin Grand Park was traded in June with a deposit of 100 million KRW and a monthly rent of 4.3 million KRW. In Dongjak-gu, last month, an 84㎡ unit in Lotte Castle Edufore was traded with a deposit of 100 million KRW and a monthly rent of 3.6 million KRW. In Mapo-gu, monthly rent transactions ranging from 3.6 million to 3.8 million KRW were made for 83~84㎡ units in Mapo Hangang Prugio, Mapo Hangang 2nd Prugio, Gongdeok Park Xi, and e-Pyeonhansesang Mapo River Park. In Seodaemun-gu, 84㎡ units in Chungjeongno SK View, DMC Parkview Xi Phase 1, and Hillstate Sinchon were contracted at monthly rents of 3 million KRW.

The rise in interest rates appears to have influenced the sharp increase in high-priced monthly rents. A representative from NH Nonghyup Bank explained, "As house prices have recently fallen, the capital return rate landlords receive has decreased, so to compensate for the return rate, houses that were supplied as jeonse are being converted to monthly rent to secure income yield," adding, "From the tenant's perspective, paying monthly rent has become cheaper than taking out a jeonse loan due to the interest rate hike, leading to the choice of monthly rent."