High-Value Monthly Rent Contracts Up 4.67% Year-on-Year
Acro Seoul Forest Signs 35 Million KRW Contract
Jeonse Loan Regulations and Market Volatility Drive Trend
The number of high-value monthly rent contracts exceeding 5 million KRW signed in Seoul last year increased by nearly 5%. It is largely analyzed that this shift is due to financial authorities' loan regulations making it difficult to obtain jeonse loans, and wealthy individuals finding it burdensome to tie up large sums in jeonse, thus turning to monthly rent demand. Experts predict that this trend will continue even if the base interest rate is lowered.
According to the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system on the 6th, the total number of monthly rent transactions exceeding 5 million KRW in Seoul last year was 1,395. The total number of contracts, including both new and renewal contracts, slightly decreased compared to the previous year (1,408 contracts). However, based on new contracts alone, there were 1,142 cases, marking a 4.67% increase from the previous year (1,091 cases).
Among these, there were 25 new contracts last year for ultra-high monthly rents exceeding 20 million KRW per month. By region, Seocho-gu recorded the highest number of high-value monthly rent transactions exceeding 5 million KRW. Last year, Seocho-gu had a total of 455 high-value monthly rent contracts (new and renewal). Gangnam-gu (445 contracts), Yongsan-gu (222 contracts), Seongdong-gu (95 contracts), and Songpa-gu (51 contracts) followed.
In November last year, a monthly rent contract was signed at Hannam The Hill, a luxury residence located in Yongsan-gu, Seoul, with a deposit of 400 million KRW and a monthly rent of 25 million KRW. In May last year, a 200㎡ unit at Acro Seoul Forest in Seongdong-gu, Seoul, was contracted with a deposit of 35 million KRW and a monthly rent of 35 million KRW.
This year, the preference for high-value monthly rents seems likely to continue. This month in Seoul, a total of 39 high-value monthly rent contracts exceeding 5 million KRW were signed, with 28 of these being new contracts. The most expensive transaction was at Trimage Zero in Seongdong-gu, Seoul, where an 84㎡ unit was contracted with a deposit of 300 million KRW and a monthly rent of 11 million KRW.
The increase in high-value monthly rents is analyzed to be due to strengthened regulations on jeonse loans by financial authorities. Since September last year, some commercial banks raised the threshold for jeonse loans for homeowners, causing apartment monthly rents to surge. According to KB Real Estate, the apartment monthly rent price index in Seoul was 120.426 in December last year, an increase of 4.344 points from August (116.082), before the implementation of the homeowner jeonse loan regulations. For example, in Banpo Xi, Seocho-gu, Seoul, an 84㎡ (high-floor) unit's monthly rent based on a 400 million KRW deposit rose from 4.5 million KRW in May last year to 4.8 million KRW in December of the same year.
Another reason for the expansion of the high-value monthly rent market is the increase in monthly rent contracts made by corporations for purposes such as inviting overseas buyers. Yoon Ji-hae, senior researcher at Real Estate 114, explained, "In cases where corporations use monthly rent contracts as company housing, they often pay above market prices," adding, "With the acceleration of jeonse-to-monthly rent conversion due to jeonse loan regulations, the addition of corporate contracts maintains the upward trend in monthly rents."
There is also an analysis that this is the result of mutual understanding between landlords and tenants. Researcher Yoon said, "The high-value monthly rent market emerged from the matching of landlords' desire for a definite return rather than lump-sum management and tenants' demand not to tie up large sums of money," explaining, "Most high-value monthly rent tenants, who are wealthy individuals, seem to feel less burdened by monthly rent expenses than by having large sums of money tied up."
Some also view that perceptions of monthly rent are changing due to high interest rates and market uncertainties. Kwon Young-sun, an analyst at Shinhan Bank's Real Estate Investment Advisory Center, said, "Wealthy individuals living in high-value monthly rents are likely to already own more than one home," and explained, "Due to acquisition tax surcharges and market volatility, owning multiple homes is currently burdensome, so they choose to rent despite paying high amounts."
She continued, "Since lump sums must be tied up and interest burdens are high due to high interest rates, jeonse is no longer an attractive option," and forecasted, "Even if the base interest rate is lowered in the future, there will be a time lag before the effect of the rate drop is felt, so it will take time to bring immediate changes to the high-value monthly rent market."
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