7 Out of 10 Officetel Lease Contracts in Seoul Are Monthly Rent
Monthly Rent Prices Rise 0.35%, Showing an Upward Trend
An officetel located in Noryangjin, Dongjak-gu, Seoul, where civil service exam academies and entrance exam academies are concentrated. Photo by Jinhyung Kang aymsdream@
The proportion of monthly rent in officetel lease transactions is steadily increasing. More than 7 out of 10 Jeonse and monthly rent contracts signed in Seoul were recorded as monthly rent. Analysts attribute this trend to ongoing interest rate burdens, reductions in Jeonse guarantee ratios, and the impact of Jeonse fraud, which have all contributed to a growing preference for monthly rent.
According to the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system on the 24th, a total of 5,746 officetel Jeonse and monthly rent transactions took place in Seoul in December last year, with monthly rent accounting for 72.9%. This represents a 5.2 percentage point increase compared to December 2023 and a 10.0 percentage point rise compared to December 2022. The share of monthly rent in officetel lease transactions has been increasing year by year.
Monthly comparisons also reveal a rise in the proportion of monthly rent. In November last year, 72.6% of the 6,140 officetel Jeonse and monthly rent transactions in Seoul were monthly rent, and in October of the same year, 70.3% of 6,210 transactions were monthly rent.
Monthly rent prices are also trending upward. According to a report by the Korea Real Estate Board, in the fourth quarter of last year, Seoul officetel sale and Jeonse prices rose by only 0.02% compared to the previous quarter. In contrast, monthly rent increased by 0.35%, showing a relatively larger rise.
Industry insiders cite high interest rates as the reason for the increased proportion and price of monthly rent transactions in officetels. Although the base interest rate is on a downward trend, various loan regulations have prevented the actual burden of Jeonse loan repayments from easing.
Additionally, the government plans to reduce the Jeonse loan guarantee ratio from 100% to 90% in the first quarter of this year. Loan guarantees involve a guarantor backing the repayment of Jeonse loans obtained from financial institutions. The Housing and Urban Guarantee Corporation (HUG) and SGI Seoul Guarantee Insurance have provided 100% guarantees. However, if banks begin to bear some responsibility, it is expected that Jeonse loan interest rates may rise.
The trauma from past Jeonse fraud cases also plays a role. There is a tendency to choose monthly rent, which carries less risk of fraud unless the difference is significant, especially in officetels where many people in their 20s and 30s reside. A real estate agent in Gangnam-gu, Seoul, said, "Although the Jeonse fraud issue seems to have quieted down over time, many people still avoid Jeonse," adding, "Many people simply prefer to pay monthly rent, which has caused monthly rent prices in officetels in the area to rise significantly."
Experts diagnose that overall perceptions of Jeonse and monthly rent are changing. Yoon Soo-min, a specialist at NH Nonghyup Bank, explained, "Since Jeonse loan interest rates have risen significantly, people seem to feel that there is little difference between monthly rent and Jeonse loan interest," adding, "Because officetels also have an investment aspect, sensitivity to changes in Jeonse and monthly rent has also increased."
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