Korean landlords turn to Airbnb for property rent income

[Courtesy of Signiel Residence and Airbnb]

A growing number of landlords in South Korea are renting out their houses via house-sharing platform Airbnb as they seek more profit amid the low interest rate environment for jeonse, or long-term lease, deposit.

Maeil Business Newspaper looked into the Airbnb app and found Sunday that dozens of apartments have been listed as rooms available in Gangnam in southern Seoul. The properties varied in size and type, encompassing small apartments and high-end penthouses.

The Signiel Residence, a luxury residential place in Songpa District in southern Seoul was one of the Airbnb listings. A weekend stay in the place was offered at 3.5 million won ($3,000), including cleaning and service fees. By comparison, the rental price of the nearby real estate listings for Signiel was an average of 18 million won with a hefty deposit of 2 trillion won. For the landlords, hosting only five guests a month on Airbnb can cover their monthly rent.

Hosting guests have emerged as a new source of income among landlords.

However, using residential places for accommodation purposes, especially in urban areas, requires landlords to register with the local government their properties as accommodations for only foreign tourists.

However, many were presumed to be undocumented businesses. Maeil Business Newspaper found tens of hundreds of housing properties in southern Seoul, including Gangnam, Seocho, and Songpa districts, on the Airbnb app. However, only 107 properties are legal accommodation businesses, according to the records of the Gangnam District Office.

“Illegal businesses can be imposed for a sentence of up to 2 years or a fine of up to 20 million won,” said Won Sang-min, a lawyer.

A limited type of residential property eligible to be legal accommodation businesses explained why illegal accommodations have been so prevalent.

Under the national accommodation law, small-sized studios and officetels, which refer to a residential place as a combined form of office and residence, cannot be registered as accommodations. The law specifies that renting small-sized studios does not align with the purpose of the law designed to share spare rooms with foreigners and that officetels cannot be used as a residential area.

However, more landlords with small villas and officetels have used their properties as accommodations for even local Koreans as well as foreigners amid growing reluctance to rent such non-apartments.

Hosting only foreigners also no longer guarantees profitability.

During the first quarter of this year, foreign tourists reached only 44.6 percent of the pre-pandemic levels in 2019, creating challenges in attaining profitability solely based on foreign demand. Legal lodging facilities for foreign tourists can only accommodate foreigners under the existing legal system. However, in reality, more Koreans are also utilizing such accommodations.

“The current law prohibits nationals from using accommodations for foreigners,” said an official from the Ministry of Culture, Sports and Tourism. “As this kind of regulation is not observed in other countries, the National Assembly is currently considering an amendment that would enable Koreans to access and use these foreign tourist accommodations.”