[Asia Economy Reporter Yoo In-ho] Due to the jeonse crisis, consumer interest in public-supported private rental housing (hereinafter referred to as private rental housing) is increasing.
This is because it offers the advantage of stable residence for up to 8 years, with rent increases limited to within 5% per year. Additionally, the lower application threshold compared to public rental housing and the fact that these are private brand apartments, which reduces resistance among the middle class, are also cited as factors contributing to their popularity.
According to the industry on the 26th, by the end of the year, 4,654 units of public-supported private rental apartments will be supplied across three complexes in the metropolitan area.
HDC Hyundai Development Company will introduce 2,205 units of 'Gocheok I-Park' in Gocheok-dong, Guro-gu, Seoul; Daewoo E&C will offer 1,445 units of 'Unseo Station Prugio The Sky' in Yeongjong Sky City, Incheon; and Hyundai Construction will present 1,004 units of 'Hillstate Bongdam' in Bongdam, Hwaseong, Gyeonggi-do.
The industry expects a surge in applicants for these private rental units as the 'two lease laws'?the right to request contract renewal and the cap on rent increases?have led to a prolonged rise in jeonse prices and a shortage of listings.
Previously, the 'KTX Osong Station Daekwang Roseviang' private rental housing supplied in Cheongju, Chungcheongbuk-do in September showed a competition rate of 69 to 1 despite being a regional apartment.
This month, the 'Shin Asan Moa Elga Vista Phase 1' supplied in Asan, Chungnam also recorded a competition rate of 48.5 to 1. The 'Suncheon Daekwang Roseviang River Palace' supplied in Suncheon, Jeonnam, restricted application eligibility to nearby residents but still achieved an average competition rate of 94.3 to 1.
According to KB Real Estate Live On, last month’s jeonse supply-demand index was 191.1, the highest in 20 years since September 2001’s 193.7. The jeonse supply-demand index ranges from 0 to 200, with values above 100 indicating a higher proportion of supply shortage.
Last month, Seoul’s jeonse supply-demand index was 191.8, the highest in five years since October 2015’s 193.1. The metropolitan area recorded 194.0, the highest since September 2013’s 195.0.
Gyeonggi Province showed 195.7, and Incheon 194.1. The jeonse supply-demand index for five metropolitan cities including Busan, Daegu, Gwangju, Daejeon, and Ulsan was 191.5, the highest since the index was first calculated in April 2013.
Interest in private rental apartments is high because they impose relatively less financial burden and allow long-term stable residence without worries about moving, which has become a highlighted advantage.
Private rental apartments have no initial rent restrictions, but rent or deposit increases are limited to within 5% per year, and residents can live stably for up to 8 years.
Moreover, anyone aged 19 or older without home ownership can apply regardless of whether they have a subscription savings account for housing.
Recently, private rental housing established through joint investment by the Housing and Urban Fund and private entities, in the form of REITs that build or purchase rental housing, has also been gaining attention. The initial rent is based on the surrounding market price (standard rent), with general supply set at 95% or less of market price and special supply at 85% or less, applied differentially.
In line with the purpose of rental housing for the middle class, the area sizes are larger than those of public rental housing. For example, Gocheok I-Park consists of 64 to 79㎡ (exclusive area), while Unseo Station Prugio The Sky and Hillstate Bongdam are composed of 62 to 84㎡ units respectively.
Most public rental housing is supplied at around 60㎡. The fact that these are newly built apartments is also a merit, contrasting with the government’s recent jeonse measures, which mostly involve multi-family and row houses, as well as remodeling of hotels, commercial buildings, and offices.
However, experts point out that applicants should carefully consider the move-in dates of these apartments.
The earliest move-in is for Hillstate Bongdam in June next year, followed by Unseo Station Prugio The Sky in August next year, and Gocheok I-Park in June 2022.
A real estate official said, "Not only in the metropolitan area but also in regional areas, more and more consumers exhausted by jeonse are choosing private rental apartments as a housing alternative."
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