Seoul’s apartment rental prices have been rising for the past year, and there are growing expectations that they will continue to increase further. This is because the supply-demand imbalance in the rental market will likely persist for a considerable period, compounded by factors such as the fourth year of global contract renewals and the shift of sales demand to rentals.
According to the Korea Real Estate Board, on May 19, Seoul apartment rental prices rose 0.07% from the previous week to the second week of the month (May 13). This marks the 52nd consecutive weekly increase since last year’s second week of May.
The increase in Seoul’s apartment rental prices is due to an imbalance of supply and demand, characterized by high demand and low supply. The number of apartments for rent in Seoul has plummeted compared to half a year ago. According to real estate big data platform Asil, there were 29,303 apartments for rent in Seoul as of the 17th, down 17.1% from six months ago (35,305).
Moreover, the supply of new apartments for rent in Seoul is expected to drop sharply as the number of new units also declines. According to property platform R114, the total number of apartments (including residential and rental) in Seoul this year is 19,921 units. This is the smallest number since the relevant statistics were first compiled in 1990.
However, the demand for apartment rentals in Seoul is growing. Following recent rental scams, renters increasingly prefer apartments over villas and office buildings. Although mortgage rates have risen significantly, low-interest loans are still available for rentals. These include low-interest policy loans for newlywed couples and a mortgage loan program targeting households with newborns.
In addition to the supply-demand imbalance, there are other sources of uncertainty in the rental market. Starting in August, tenants who exercised their contract renewal rights will see their leases expire (four years). Given that security deposits cannot be increased for the next four years, landlords are likely to increase asking prices significantly.
Buyers waiting to enter the sales market are also expected to rent instead. Supply is unstable in the sales market due to rising prices and construction costs. Reconstructed apartments, popular last year, have become less desirable due to growing uncertainty.
Ham Young-jin, head of Woori Bank’s Real Estate Research Lab, said, “With the implementation of policy funds that can be borrowed at low interest rates in the first quarter of this year, tenants are flocking to favored areas such as the metropolitan area and new constructions.”
“With fewer rentals than in the past and fewer people moving into Seoul, rental prices are expected to continue to rise for the foreseeable future.”
