The speed of the rental market's transition to monthly rent is expected to accelerate. This is because the guarantee ratio for rental loans from the rental guarantee institution is decreasing, making it harder to secure loans. Already, due to the aftermath of rental scams, the proportion of monthly rent in the leasing market is increasing, raising concerns about tenants' housing instability.
On the 9th, the government decided to lower the rental loan guarantee ratio of the Housing and Urban Guarantee Corporation (HUG) and Seoul Guarantee Insurance from 100% to 90%. Currently, among rental loan guarantee institutions, only the Korea Housing Finance Corporation (HF) guarantees only 90% of the total loan amount.
This is a measure to reduce the rental loan market, which amounts to 200 trillion won, from the perspective of managing household debt. The Ministry of Land, Infrastructure and Transport and the Financial Services Commission are working to lower the rental loan guarantee ratio. A government official noted, "The guarantee ratio for rental loans will be adjusted to 90% as early as the first quarter."
If the guarantee institution lowers the guarantee ratio for rental loans, it is expected that the threshold for rental loans will increase. When guarantee institutions guarantee 100% of rental loans, banks and financial institutions do not have to worry about losing money, allowing them to offer rental loans more easily. However, since the guarantee institution has lowered this ratio, lending institutions will have to bear the risk of bond defaults. As a result, financial institutions may strengthen their examination of rental loans and raise rental loan interest rates. There may also be cases where the loan limit is reduced depending on the examination results.
As the threshold for rental loans increases, it is forecasted that this will encourage the monthly rental transition of rentals. If tenants are unable to secure sufficient funds through rental loans, they are expected to cover the shortfall through partial rental or monthly rent. Particularly, given the current situation of insufficient dwelling supply leading to rising rental prices, the proportion of monthly rent in the leasing market is likely to increase even more rapidly. This is expected to lead to an increase in tenants' housing instability.
Woo Byeong-tak, a specialist at Shinhan Bank's Premier Pathfinder, said, "While the reduction of the rental loan guarantee ratio will not immediately lead to a transition to monthly rent, it could increase rental prices in conjunction with the current situation where overall dwelling supply has decreased." He added, "In the absence of alternatives due to a shortage of dwelling supply, the burden of rising rental prices will have to be shouldered, and eventually, a transition to monthly rent will occur." He further noted, "This will particularly have a significant impact on non-apartment dwellings in the Seoul and metropolitan areas."
The proportion of monthly rent in the housing leasing market is already rapidly increasing. This is largely due to the tendency to avoid leaving a lump sum of money with landlords after the fallout from rental scams.
Last year, the proportion of guaranteed monthly rent and partial monthly rent in housing lease transactions significantly exceeded the average of the last five years. According to the Ministry of Land, Infrastructure and Transport, it was recorded that the proportion of monthly rent in nationwide lease transactions from January to November of last year was 57.4%. This is more than 10 percentage points higher than the average of the last five years.
In particular, this trend is more pronounced in non-apartment dwellings, where the proportion of monthly rent is 69.5%, an increase of 17.0 percentage points compared to the recent five-year average of 52.5%.