"Even Vacant Houses Don't Lower Rent"... Songpa-gu Sees Monthly Rent Up to 4 Million Won

Increase in Monthly Rent Transactions for Apartments in Songpa-gu
Jamsil-dong Jamsil Els February Jeonse Transactions < Monthly Rent Transactions
Official Says "Lease 3 Laws, Because of Taxes"

According to the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system on the 26th, a monthly rent transaction of 4 million won took place last month at Jamsil Els in Jamsil-dong, Songpa-gu, Seoul. Jamsil Els apartment complex in Jamsil-dong. / Photo by Hwang Seoyul

[Asia Economy Reporter Hwang Seoyul] "These days, monthly rent is much more common than jeonse (long-term deposit lease). Among the monthly rents, there are many vacant places because tenants don't move in, but landlords have no intention of lowering the monthly rent. They are not particularly anxious even if the house doesn't rent out quickly." (Representative of A Real Estate Agency, Jamsil-dong, Songpa-gu, Seoul)

As the trend of jeonse turning into monthly rent becomes more prominent in the housing market recently, this trend is also being observed in Songpa-gu, Seoul.

According to the Seoul Real Estate Information Plaza on the 27th, the proportion of monthly rent transactions among all apartment rental transactions in Songpa-gu last month recorded 43.98%, an increase of 7.89 percentage points compared to the previous year. The proportion of monthly rent transactions among all apartment rental transactions in Seoul last month (37.78%) increased by 2.22 percentage points compared to the previous year.

This is even more evident when looking at rental transactions in large apartment complexes in Songpa-gu. As of the morning of that day, there were 448 jeonse listings and 432 monthly rent listings for Jamsil Els in Jamsil-dong, Songpa-gu on Naver Real Estate. According to the Ministry of Land, Infrastructure and Transport's actual transaction disclosure system, there were 11 jeonse transactions and 27 monthly rent transactions this month. In the same month last year, jeonse (44 transactions) was more than monthly rent (33 transactions). Jamsil Els, completed in September 2008, is a large apartment complex consisting of 72 buildings and 5,678 households with exclusive areas ranging from 84 to 149㎡.

Although the supply of monthly rent units has increased due to the conversion of jeonse to monthly rent, monthly rent prices have hardly dropped. According to the Ministry of Land, Infrastructure and Transport's actual transaction disclosure system, an apartment in Jamsil Els with an exclusive area of 84.8㎡ was traded last month with a deposit of 50 million KRW and a monthly rent of 4 million KRW. Considering that a similar lease with the same exclusive area and deposit was traded at 3.8 million KRW in February last year, it can be interpreted that the law of supply and demand has little effect on the price.

Officials from Songpa-gu, Seoul explained that landlords rarely lower monthly rent prices due to the three lease laws. Jamsil-dong Jamsil Els apartment complex.
Photo by Hwang Seoyul

Officials from Songpa-gu real estate agencies unanimously said that the "Lease 3 Act," implemented at the end of July 2020, raised monthly rent prices. This is because if a tenant who has signed a lease contract requests a contract renewal, the rent ceiling system for jeonse and monthly rent applies, allowing only up to a 5% increase compared to the previous rent. A representative from B Real Estate in Jamsil-dong, Songpa-gu said, "Many landlords say they want to raise the monthly rent to market price when signing new contracts due to the Lease 3 Act."

The B Real Estate representative added, "As taxes imposed on landlords have increased, the dominant thought is to cover these costs through monthly rent." When high comprehensive real estate taxes are levied on multi-homeowners owning two or more houses in regulated areas, landlords cover these costs through monthly rent. All areas of Seoul are classified as regulated areas.

Im Byungcheol, Research Team Leader at Real Estate R114, explained, "Looking at the whole of Seoul, monthly rent transactions are increasing compared to jeonse, and the average monthly rent price is also rising," adding, "With the implementation of the new lease law and landlords passing tax burdens onto tenants, the trend of jeonse turning into monthly rent will accelerate."