Korea’s residential rental market diversified on high borrowing costs

[Photo by Park Hyung-ki]

Short-term leasing including weekly rentals is becoming a new trend in the residential rental market in South Korea after borrowing costs for a large deposit have surged from interest rate hikes.

Listings for monthly or weekly home rentals are now easy to spot on rental websites in Korea. In one popular local home rental website, an average of 20 new listings are posted a day for weekly home rentals, according to data gathered by Maeil Business Newspaper on Monday.

Renting a home by the week is more expensive than usual home rentals by the month or year, but it does not require a large deposit. As a bank loan for a big deposit costs a borrower more than before due to higher interest rates, deposit-free short-term rental has become attractive to young tenants. In Korea, tenants normally rent their homes under the country’s unique jeonse system that enables a tenant to lease an apartment by paying a large deposit money, usually 50 percent of the property‘s value or higher.

Short-term rentals are more preferred also due to growing concerns over losing jeonse deposits from the insolvency of landlords who fail to pay debts to banks in a high interest rate environment.

Landlords are also actively shifting to weekly house leasing to avoid vacancy.

“It is common for monthly home rentals become more popular than jeonse when interest rates increase, and weekly rental is one of the new rental contracts that appear in the market with the change in trend,” said Kwon Dae-jung, a real estate professor at Myongji University.