Apartments near schools and stations are sold out… Why have rent prices in Seoul risen for 49 consecutive weeks?

“Houses with children are usually looking for a 30-pyeong lease, but since the items are so rare, the price is worth it.”

The number of leased apartments in Seoul is drying up. As finding a house for rent becomes more difficult than finding a star in the sky, rent prices continue to rise day by day.

There are concerns that the upward trend in rental prices will continue for some time as the number of move-ins has decreased compared to last year and housing starts last year fell by one-third compared to the annual average, signaling a stronger supply shortage.

According to the Korea Real Estate Agency’s national apartment price trend data for the fourth week of April (as of the 22nd) on the 26th, the rental price of apartments in Seoul increased by 0.07% compared to the previous week. Although the increase has decreased slightly compared to last week (0.08%), it has continued to rise for 49 weeks since the fourth week of May last year.

When looking at the rate of change in rental prices in Seoul, Seongdong-gu recorded the largest increase, rising 0.17% compared to the previous week, followed by Eunpyeong-gu with 0.15%. Nowon-gu (0.13%), Yongsan-gu (0.12%), Dongdaemun-gu (0.12%), Jungnang-gu (0.11%), Geumcheon-gu (0.10%), and Dongjak-gu (0.10%) also rose by relatively large margins.

The rise in rent prices in Seoul is interpreted as the result of a surge in demand for rent amid a wait-and-see trend for apartment purchases. According to KB Real Estate’s weekly jeonse supply and demand index, the Seoul jeonse supply and demand index for the third week of April was 132.65, the highest since May 2022. The jeonse supply and demand index is a statistic that indexes the results of inquiries into market trends through a questionnaire to a licensed real estate agency. If it is higher than 100, it means that demand is greater than supply.

An official from the Korea Real Estate Agency said, “Demand for jeonse is steadily maintained, mainly in areas near train stations and large complexes with excellent school districts, excellent locations, and good residential conditions,” and added, “The upward trend is continuing as a shortage of properties appears.”

Demands are flocking to jeonse, but jeonse properties are suffering from a drought. According to data from a real estate big data company, the number of leased apartments in the Seoul area totaled 30,510 as of the 25th, down 13.5% from the end of last year (35,305) and 44.1% from the beginning of last year (54,666).

The number of new residents in the Seoul area (based on complexes with 30 or more households) was 593 households in February, 960 households in March, and 491 households in April, falling below 1,000 households for the past three consecutive months. There are no new tenants in May at all. The only units scheduled to move in in June are ‘Gangdong Heritage GXai’ (1,299 households) in Gangdong-gu, Seoul and ‘Dongil Centasia at Namguro Station’ (162 households) in Guro-gu. Originally, ‘Raemian One Pentas’ in Seocho-gu, which has 641 households, was scheduled for occupancy in June, but due to schedule delays, it was postponed to the second half of the year.

The decline in jeonse listings is also due to a decrease in the number of units coming to the market as tenants choose to renew contracts amid rising jeonse rents. According to Real Estate R114’s analysis of actual transaction price data from the Ministry of Land, Infrastructure and Transport, out of 36,247 lease contracts for apartments in Seoul reported as of the 17th, 12,604 were renewal contracts, accounting for 35% of the total. Compared to the 27% recorded last year, the rate of renewal contracts has increased noticeably.

Experts predict that the increase in rental prices in the Seoul area will continue for the time being due to a decrease in the number of tenants moving in. Ham Young-jin, head of Woori Bank’s Real Estate Research Lab, said, “As high interest rates continue to prolong and market uncertainty increases, the demand for renting rather than purchasing a home is increasing, which is acting as a factor in rising rental prices,” adding, “The number of new residents this year has decreased, and demand for rentals during the spring moving season has increased.” “As a result, it is expected that there will be a clear increase in rental prices in some complexes,” he predicted.

Kim Seong-hwan, associate research fellow at the Construction Industry Research Institute, also said, “It is true that the quantity of occupancy in Seoul is good until this year, but it will be insufficient starting next year.” He added, “Assuming that demand is concentrated in jeonse in a situation where the wait-and-see attitude is still strong for apartment sales, jeonse rents are likely to rise further in the future.” “It’s big,” he diagnosed.

Meanwhile, according to the ‘Housing Supply Situation Analysis and Stable Housing Supply Strategy’ report published by the Korea Research Institute for Human Settlements, the number of housing permits nationwide last year was 399,000 households, which was 74.2% of the annual average (2005-2022). The number of permits in Seoul was also 26,000 households, an annual average of only 37.5%. The amount of construction started in Seoul was only 32.7%, or 21,000 households.