The Seoul apartment full-rent market has sharply decreased in listings... Monthly rent conversions are accelerating

Seoul’s full-rent apartment market is evolving toward a rapid expansion in the share of monthly-rent units, as both a sharp drop in available listings and rising prices occur at the same time. During the spring peak moving season—when demand is concentrated—the number of full-rent units decreases significantly, narrowing tenants’ options, and its impact is spreading to full-rent prices and the entire monthly rental market.

On the 19th, according to real estate big data company Asil, based on the previous day, there were a total of 15,427 full-rent apartment units in Seoul. This is a 49.9% decrease from 30,500 units on April 18, 2022, two years earlier. Full-rent listings decreased in all 25 districts of Seoul, with the decline rates, in order, being 88.5% in Nowon District, 88.0% in Jungnang District, 83.5% in Gangbuk District, 83.4% in Seongbuk District, and 77.1% in Gwanak District. Gwanak District has only 54 full-rent units, Jungnang has 51, Gangbuk has 50—and even in large communities such as Wolgye-dong Wolgye Modern, which has 1,281 households, there are only 2 to 3 full-rent units.

The background to this change is that the market structure linking buying and selling with leasing has shifted. With the measures announced on October 15 of last year designating the entire Seoul area as a land transaction permission zone, an obligation requiring actual occupancy for at least two years after purchasing was established, effectively blocking the so-called “price-difference investment” that comes with full-rent rights. Previously, price-difference investment had been one channel for increasing the supply of full-rent units. As this route narrows, market interpretation is that the number of full-rent units flowing into the market has decreased as well. On-site real estate agencies also said that even in large communities, full-rent units are almost impossible to find.

In the full-rent market, where supply is shrinking, price increases are especially pronounced. According to the Korea Real Estate Board’s Housing Price Trend Survey, last month the average full-rent price for Seoul apartments was 6,014.9 million won. Since 6,014.9 million won in October 2022, it surpassed 6 billion won again for the first time in 3 years and 5 months. The upward trend centered on newly built complexes is even steeper. On the 4th of this month, a full-rent contract was signed for a Hanwha Forêna apartment in Mi-a-dong, Gangbuk District, Seoul—84.8655㎡ dedicated area—for 7.75 billion won. Compared with a contract for the same size signed on December 22 last year for 6.8 billion won, in less than four months it increased by nearly 1 billion won. Last month, the full-rent price ratio—the ratio of full-rent price to sale price—also reached 52.1%, higher than the previous month’s 52.0%. As Seoul apartment prices rise rapidly, the full-rent price ratio, which had been declining for 10 consecutive months since April last year, turned back to an upward trend after 11 months.

As full-rent prices become more expensive and listings remain scarce, tenants are shifting more toward monthly rentals. Based on registration data from the Korea Ministry of Land, Infrastructure and Transport’s actual transaction price disclosure system, from the beginning of this year through the day before, there were a total of 67,506 apartment lease contracts in Seoul, including 32,608 monthly-rent contracts, accounting for 48.3%. In effect, one out of every two lease contracts is a monthly-rent contract. The share of monthly-rent contracts for Seoul apartments rose from 28.2% in 2019 to 31.5% in 2020, and has been maintained at over 40% from 2022 through last year. The problem is that the monthly-rent market is not broad either. Based on the previous day, the number of monthly-rent listings for Seoul apartments was 10,059, down 24.9% from a year earlier and down 17.0% from two years earlier. Using the Korea Real Estate Board market prices, last month’s average monthly rent for Seoul apartments was 1.528 million won, again setting a new all-time high for the monthly benchmark.

Market participants believe that factors such as the shortage of full-rent units, rising full-rent prices, restrictions on full-rent loans, and concerns about the burden of holding taxes will work together to accelerate the shift to monthly rent. Full-rent and monthly rent are directly tied to actual demand—especially housing costs for ordinary people—so it is difficult to view this trend as just a simple change in transaction form. In the future, this trend may further increase the burden on Seoul’s rental market, and attention will focus on whether the government will roll out supplementary measures that take into account supply, financial stability, and price stabilization at the same time.