As commercial banks have lowered the thresholds for loans since the new year, the number of rental properties in the metropolitan area is decreasing sharply. Rental listings have dropped by over 3,700 in just one month. In line with the Bank of Korea's trend of lowering the base interest rate, the rates for rental loans are expected to decrease in the future, and as the number of move-in properties also declines, this trend of decreasing listings is expected to continue.

According to the real estate big data platform Asil on the 24th, the number of rental listings in Seoul was 30,570 as of the previous day, which is a decrease of 2,355 (7.2%) from a month ago (32,925). The number of rental listings in Seoul exceeded 30,000 in early December last year but has been rapidly declining this year. In Gyeonggi Province, the number of rental listings has decreased from 31,864 to 30,466, a drop of 1,398 (4.4%). In total, rental listings in the metropolitan area fell by 3,753 in a month.

A loan window at a bank in Seoul. /Courtesy of News1
A loan window at a bank in Seoul. /Courtesy of News1

The decrease in rental listings can largely be attributed to changes in the loan environment. Commercial banks have relaxed regulations that were applied to rental loans last year. Shinhan Bank and Woori Bank suspended rental loans for homeowners in the metropolitan area last year, but they have resumed this year. Kookmin, Hana, and Woori Banks have partially lifted restrictions on switching rental loans this year. Kookmin Bank limited the rental loan limit only to the range of deposit guarantee increases, but this regulation has been lifted this year.

Ham Young-jin, head of the real estate research lab at Woori Bank, noted, "The continuous trend of converting to monthly rent, along with the reduction in additional charges, seems to have contributed to the decline in rental listings as household loans have restarted in the financial sector at the beginning of the year."

The fact that the base interest rate was cut twice last year is also being reflected in the market interest rates over time, leading to a downward trend in rental loan rates. According to the Banking Association, the cost of funds index (COFIX) based on new handling amounts was 3.22% in December last year, down by 0.13 percentage points from the previous month. COFIX is the weighted average interest rate of funds raised by eight domestic banks and serves as the benchmark for floating rate loan products. Consequently, the rental loan rates based on new COFIX (6 months) have decreased from 4.48-5.88% to 4.35-5.75%.

With the Bank of Korea indicating an additional cut in the base interest rate next month, the rental loan rates are likely to decrease further. Kim Byeong-hwan, chairman of the Financial Services Commission, stated during a regular press briefing on the 22nd, "Despite the base interest rate being cut twice last year, it seems that the speed and extent of the banks' rate cuts have not been sufficiently reflected. When the base interest rate goes down, the loan rates must also reflect that."

The fact that the number of move-in properties is expected to decrease this year is also a factor that could accelerate the depletion of rental listings. According to Real Estate R114, the total number of apartment move-in properties nationwide this year is projected to be 263,330, which is a decrease of approximately 28% (107,280 households) compared to last year's 364,058 households. This is the lowest level in 11 years since 2014 (274,943 households).

Park Hap-soo, a concurrent professor at the Graduate School of Real Estate at Konkuk University, said, "In order for rental listings to increase, existing listings need to be supplemented with new move-in properties, but this year's new move-in properties are actually declining. This suggests that the supply-demand imbalance in the rental market will worsen this year."