The monthly rent index for Seoul apartments rose 10.3 points last year, hitting a record high since statistics were compiled.
As the phenomenon of "the conversion of jeonse to monthly rent" emerges amid a decline in jeonse listings and tighter lending regulations, concerns are rising that the burden of housing costs on tenants will be prolonged.
According to KB Real Estate's monthly price trends for dwellings on Jan. 6, the Seoul apartment monthly rent index stood at 131.2 in Dec. last year.
The Seoul apartment monthly rent index rose 10.3 points, from 120.9 in Jan. last year to 131.2 in Jan. this year, one year later. This is a record high since statistics were compiled. The KB apartment monthly rent index is calculated based on mid-sized apartments (exclusive area 95.86 square meters) or smaller.
The average monthly rent also rose by more than 100,000 won over the year. According to the Korea Real Estate Board (REB), the average monthly rent for Seoul apartments increased from 1,343,000 won in Jan. last year to 1,476,000 won in Dec., up more than 130,000 won.
Last year's lease market saw jeonse prices rise due to a decline in jeonse properties, and monthly rent transactions increased as tenants who found it harder to raise jeonse funds moved to monthly rent. Ultimately, the deepening conversion of jeonse to monthly rent drove up monthly rents as well.
In particular, after the government's demand-suppression measures such as the 6·27 package and the 10·15 package, jeonse listings decreased, creating a supply-demand imbalance that led to upward price momentum.
With tighter regulations on jeonse loans, tenants facing difficulties in financing are increasingly opting for monthly rent. The share of monthly rent in overall lease transactions is also growing each month.
According to dwellings statistics released by the Ministry of Land, Infrastructure and Transport, the share of monthly rent transactions in nationwide dwellings from January to November last year was 62.7%, up 5.3 percentage points from the same period a year earlier.
The share of monthly rent for apartments was tallied at 47.9%, up 3.7 percentage points over the same period. The share of monthly rent for non-apartments was found to be 76.2%, up 6.7 percentage points over the year.
This year, the upward trend in monthly rents is expected to continue as the conversion of jeonse to monthly rent accelerates. With a decline in move-in volume and a clear trend toward converting to monthly rent, upward pressure on monthly rents in the greater Seoul area is expected to persist.
Through its recently published "Construction market and issues through indicators," the Construction Policy Research Institute analyzed, "If the shift to monthly rent accelerates among demand groups lacking the capacity to raise jeonse funds, the housing cost burden on middle- and low-income tenants could become structurally entrenched beyond a temporary phenomenon."