'Paying 10 Million Won a Month to Live': New Contracts Rise... "Regulations? This Is a Completely Different World" [Real Estate AtoZ]

25 Ultra-High-End Apartment Rentals in Seoul Exceed 10 Million Won in September
Up by 4 from Previous Month, Concentrated in Gangnam, Seocho, Yongsan, and Seongdong
84% Are New Leases
"A Completely Separate Market"

The number of ultra-high-priced monthly rental contracts exceeding 10 million won has surged. Analysts attribute the increase in such contracts to greater market liquidity, driven by expectations of interest rate cuts and the KOSPI surpassing 4,000 points.

According to the Ministry of Land, Infrastructure and Transport’s actual transaction price disclosure system on October 30, there were 25 apartment rental contracts in Seoul last month with monthly rents exceeding 10 million won. This represents an increase of 4 cases (19%) compared to 21 cases in the previous month. Even after the government implemented lending regulations in June, more than 20 high-value apartment rental contracts with monthly rents of 10 million won or more were signed each month.

All ultra-high-priced rental transactions exceeding 10 million won last month were concentrated in the districts of Gangnam, Seocho, Yongsan, and Seongdong, where luxury apartments are located. In Seongsu-dong 1-ga, Seongdong-gu, a 84-square-meter Trimage luxury apartment was rented for a deposit of 100 million won and a monthly rent of 12 million won. In Hannam-dong, Yongsan-gu, a 222-square-meter Le Garden The Main Hannam apartment was rented for a deposit of 4 billion won and a monthly rent of 14 million won. For Hannam The Hill, a symbol of high-end housing in Hannam-dong, Yongsan-gu, a 233-square-meter unit was contracted for a deposit of 700 million won and a monthly rent of 23 million won. In Seobinggo-dong, Yongsan-gu, a 242-square-meter Arpe Han River apartment was rented for a deposit of 200 million won and a monthly rent of 24.5 million won.

Most high-value apartment rental contracts were found to be new contracts, meaning new tenants were found for these units. Of last month’s contracts, 21 cases, or 84%, were new. From June to August, after the government’s lending regulations began, the proportion of new apartment rental transactions with monthly rents of 10 million won or more hovered around 75%, but last month it surpassed 80%. Both contracts for ultra-high-priced monthly rents exceeding 20 million won last month were also 100% new contracts.

In contrast, the proportion of new contracts in the entire apartment rental market last month was only 55%. The share of new contracts was 58.5% in June, but as renewals increased, this figure dropped by 3.5 percentage points.

The increase in demand for ultra-high-priced rentals is attributed to a trend among wealthy individuals who prefer to rent rather than own apartments worth several billion won, thereby freeing up capital for other investments and increasing their wealth. Yoon Sumin, a real estate expert at NH Nonghyup Bank, explained, "If we assume the sales price of an apartment with a monthly rent of 10 million won is around 8 billion won, investing that amount to earn just 4% per year would yield 320 million won, which is more than enough to cover the annual rent of 120 million won. This is why high-net-worth individuals who prefer to pay monthly housing costs and invest their capital are seeking high-value rental apartments."

The main demand for ultra-high-priced apartments comes from asset holders such as those with virtual assets, senior corporate executives, and celebrities. These are individuals with the cash flow to afford monthly rents of tens of millions of won without relying on bank loans. As more luxury apartments are built in the three Gangnam districts, Yongsan-gu, and Seongdong-gu, both the volume and prices of ultra-high-priced rental transactions are expected to rise. In June, a 241-square-meter unit at Galleria Foret in Seongdong-gu was newly rented for a deposit of 100 million won and a monthly rent of 40 million won. Galleria Foret drew attention in 2008 for its record-high sale price of 45.35 million won per pyeong and is known as the former residence of singer G-Dragon.

Yoon added, "As polarization intensifies and the number of expensive apartments increases, contracts involving high monthly rents will also become more common. This should be seen as a completely separate market from the government’s real estate lending regulations."