Monthly rents exceed long-term lease in Korean residential market for the first time

[Photo by Lee Seung-hwan]

Monthly rent occupied more than half of the Korean home rental market in April to exceed long-term jeonse leasing for the first time ever as borrowing money for lump-sum rent deposit became more expensive on rising interest rates.

According to data published by the Ministry of Land, Infrastructure and Transport on Tuesday, monthly rental contracts accounted for 50.4 percent of a total of 258,318 residential property lease contracts made in April.

It is the first time for monthly home rental contracts to outnumber jeonse, a house rental system unique in Korea where tenant make a lump-sum deposit for a contracted period instead of paying monthly rent to a landlord, since the government began tracking related data in 2011.

Monthly rent made up 48.7 percent of home rental contracts for January to April period, up 6.5 percentage points from the same period last year. Compared to the five-year average, it is up 7.1 percentage points.

The sharp growth in monthly home rent contact is due to the introduction of revised Housing Lease Protection Act that took effect in July 2020. With the new law in place, owners of studios, or residential units within a commercial building, were forced to disclose home rental contracts. In addition, the revised law that allows tenants to extend rental contract by another two years under original term has pushed landlords to raise deposit amount for jeonse contract, thus making it more expensive. While jeonse grew more expensive, the borrowing cost to cover the large deposit also jumped on rise in interest rates, said a real estate market expert.

Local residential property market is showing signs of recovery. The number of home buying contracts gained 9.3 percent on month to 58,407 in April. However, it is down 37.2 percent from a year ago.

By region, Seoul showed monthly addition of 20.0 percent and surrounding Gyeonggi Province 15.7 percent.

Apartment sales contracts numbered at 35,679, up 9.8 percent on month but down 39.8 percent on year. Non-apartment home sales contracts came to 22,728, up 8.4 percent on month but down 32.8 percent on year.

[¨Ï Maeil Business Newspaper & mk.co.kr, All rights reserved]