'Yeongkkeul' Slows Among 20s and 30s... Rising Interest Burden Boosts Popularity of 'Rental Housing'

Under-30s in Seoul Record 499 Apartment Transactions... Lowest Since Statistics Began
2030 Generation Turns to Rental Housing Instead of 'Home Ownership'

Citizens are looking at apartment complexes in the Songpa-gu area from the Seoul Lotte World Tower observatory, 'Seoul Sky.'
[Image source=Yonhap News]

[Asia Economy Reporter Heo Midam] The buying sentiment among the 20s and 30s generation, who had previously invested by "Yeongkkeul" (pulling together all their resources, including their soul), is rapidly shrinking in the real estate market. This is due to the expectation that the downward trend in house prices will continue for the time being, coupled with increased interest burdens from rising interest rates. As a result, some young people are postponing their dream of owning a home and turning their attention to rental housing that is cheaper compared to market prices. In particular, in Seoul, where the burden of housing prices is high, rental housing has proven popular, recording triple-digit subscription competition rates.

According to recent data from the Korea Real Estate Board, the proportion of apartment purchases by the 20s and 30s generation in Seoul hit an all-time low in June. The number of apartment sales transactions in Seoul was recorded at 2,014 in June, of which transactions by those aged 30 and under accounted for 449, representing 24.8% of the total. This is the lowest figure since the statistics began being compiled in January 2019.

The proportion of apartment purchases by the 20s and 30s generation in Seoul hovered around 30% until 2019, then exceeded 40% for the first time in August 2020 (40.3%). During the panic buying frenzy among young people last July, it even soared to 44.8%. This figure, which had remained around 40% until early this year, dropped to 37.3% in May and then hit a record low of 24.8% in June.

The reason for the frozen buying sentiment among young people is the perception that current house prices are at a peak, combined with the increased burden from rising interest rates. Especially for the 20s and 30s generation, who relatively lack financial resources, the interest burden due to rising rates is inevitably greater compared to other age groups.

A monthly rent price list is posted at a real estate agency in downtown Seoul. [Image source=Yonhap News]

Accordingly, interest among young people in rental housing that is cheaper than market prices is increasing. Rental housing is characterized by lower rent burdens and the possibility of stable long-term residence.

Recently, competition rates have also become fierce. Last month, the public rental housing subscription for the "2022 2nd Youth Purchase Rental Housing" supplied by the Korea Land and Housing Corporation (LH) saw 26,910 applicants for 263 units in Seoul, recording an average subscription competition rate of 102.3 to 1. This is the largest scale since LH began regularly recruiting youth purchase rental housing tenants nationwide.

Meanwhile, public-supported private rental housing is also popular. Introduced in 2018, public-supported private rental housing builds on the strengths of "New Stay" (corporate rental housing) promoted during the Park Geun-hye administration, while enhancing public aspects such as support for housing assistance groups. The rent increase rate is capped at within 5% (every two years), and since private construction companies build these, they have better product quality compared to general public rental housing.

Among public-supported private rental housing supplied exclusively to university students, youth, and newlyweds, the "Station Area Youth Housing" is particularly popular. In fact, during the first recruitment for Station Area Youth Housing, 16,505 applicants competed for 275 units, recording an average competition rate of 60 to 1.

Meanwhile, the Seoul Metropolitan Government plans to accelerate the supply of "high-quality rental housing." On June 1, Seoul Mayor Oh Se-hoon, while visiting Singapore to attend the World Cities Summit (WCS), announced, "By increasing the floor area ratio for rental housing and developing high-density buildings, it is possible to realize rental housing comparable to Tower Palace." He also stated plans to expand the floor area ratio of old rental housing up to 500%. Mayor Oh aims to build high-quality rental housing comparable to Tower Palace, a luxury residential-commercial complex apartment in Gangnam, Seoul.