Seoul, the city of rentals, is going rental-free

rents double in 5 years, Seoul sees rental reversal

the rental market in Seoul is changing rapidly. from January through October of this year, more than 476,000 new rental contracts were signed in Seoul, double the 239,000 signed in the same period in 2020, according to data from the Court Registration Information Plaza. in contrast, the number of rental contracts dropped 23%, from 340,000 to 260,000.

the first time renting surpassed subletting in total rental transactions was in 2022, when the share of renting was 53.2%; this year it surpassed 60%. this is a sign that Seoul is effectively becoming a rent city.

this is not just due to a lack of rental properties; the rental system itself is being shaken up in terms of landlords and tenants, government policies, and the housing supply and demand structure.

structural causes of the shrinking charter market

behind the collapse of Seoul's charter market is a complex set of policy changes.

the first is the strengthening of the property tax. in the past, the government raised the multi-family comprehensive real estate tax rate to up to 6%, and the fair market value was also raised in stages, increasing the tax burden on landlords. To cope with this, many landlords converted charters to monthly rentals.

next is the regulation of subletting. the 6-27 plan lowered the rental guarantee ratio from 90% to 80%, making it difficult for tenants to obtain financing. the 10-15 measures have also blocked gap investments as the entire Seoul area is now a regulated area.

the decline in occupancy is also severe: the number of apartments in Seoul is expected to fall by 46%, from 32,000 units this year to 17,000 next year. it is expected to drop to 10,000 units by 2027, which will exacerbate rental shortages.

the spread of high-priced rents and the impact on outlying areas

seoul's rental market is not only growing in size, but also in price. the average monthly rent in Seoul rose from KRW810,000 in 2020 to KRW1.13 million this year. the average monthly rent for an apartment is at an all-time high of 1.43 million won.

the number of ultra-high-end transactions with rents over KRW 10 million has also skyrocketed. there have been 212 deals in Seoul this year with a monthly rent of more than KRW10 million, nine times the 23 deals in 2020. in Galleriafore in Seongdong-gu, there was even a deal for 40 million won in rent with a deposit of 100 million won.

what's surprising is that these high-priced rentals are not only found in Gangnam, but also in the suburbs like Geumcheon-gu and Nowon-gu. in Doksan-dong, Geumcheon-gu, an exclusive 84-square-meter space was listed for KRW 10 million in rent with a KRW 10 million deposit, and in Nowon-gu, a KRW 3 million-a-month deal also appeared.

the reality facing renters in Seoul

the rise of subletting ultimately hits the young and middle class with low incomes the hardest. those who can't afford to rent are forced to pay over 1 million won per month as lending becomes more difficult. Marriage, childbirth, and saving become increasingly distant dreams.

on the other hand, wealthy people prefer renting to avoid taxes and administrative burdens. this is because they can pay a lower deposit and make other investments with the money left over. This is how Seoul's rent inequality is growing.

experts believe that the next two to three years, when the number of new units will plummet, will be a watershed moment in Seoul's transition to a renting city. there is an urgent need for faster supply of office buildings, urban living housing, and financial products to support youth housing.

frequently asked questions

Q1. How much of Seoul's real estate is rented? A1. As of this year, the share of rent in Seoul's rental transactions has exceeded 60%. it has been on an upward trend since it first reversed in 2022.

Q2. Why is subletting decreasing? A2. Landlords are favoring renting due to the strengthening of the wealth tax, and the regulation of rental expenditures has made it difficult for tenants to raise funds. Declining rental volume is also a major cause.

Q3. Will subletting disappear completely in the future? A3. It won't disappear completely, but the rent-centered structure is expected to become even stronger, especially by 2027, when the number of new units will plummet, resulting in a shortage of rentals.

Q4. What is the average monthly rent in Seoul? A4. The average monthly rent in Seoul is KRW 1.13 million, with apartments averaging KRW 1.43 million, the highest ever.

Q5. What are the alternatives for tenants? A5. You can consider flipping or renting with a security deposit, or move to an area outside of Seoul, such as Gyeonggi. you may also want to check out our youth housing support policies.

conclusion

seoul is already turning into a renting city. the burden on renters continues to grow amidst the structural changes brought about by the charter lending regulation, stricter property taxes, and the move-in cliff. it's time for policy to think about how to create a new rental housing system.

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