SEOUL, May 11 (AJP) -Rental offerings from monthly to longer-term contracts of more than two years are drying up in South Korea, pushing rent increases above housing price gains and adding additional pressure on inflation and household spending.
The surge first emerged in jeonse system, in which tenants pay a large lump-sum deposit for two years or longer lease instead of monthly rent. It is now increasingly spilling over into the monthly rental market as more landlords move away from deposit-based leases.
According to the Korea Real Estate Board, jeonse prices have risen 1.56 percent so far this year as of the first week of May, outpacing the 0.98 percent gain in apartment sale prices.
In the Seoul metropolitan area, apartment lease prices climbed 2.2 percent this year, compared with a 1.79 percent increase in apartment sale prices. Outside the capital region, lease prices rose 0.94 percent, while sale prices gained just 0.2 percent.
In Seoul, apartment sale prices are still rising slightly faster overall, but the gap has narrowed sharply. Lease prices have climbed 2.61 percent this year, compared with a 2.81 percent increase in sale prices.
The pace of weekly gains has also accelerated. Seoul apartment jeonse prices rose 0.23 percent in the first week of May from a week earlier, marking the fastest weekly increase since November 2015.
As more tenants shift toward monthly rentals amid a shortage of jeonse offerings, monthly housing costs are also rising steeply.
Data from KB Real Estate showed Seoul’s apartment monthly rent price index climbed to 102.74 last month, the highest level since the index was introduced in 2015.
High-end monthly rents have risen particularly sharply. In northern Seoul, the number of new monthly rental contracts worth more than 3 million won ($2,160) per month surged 53.4 percent in the first quarter from a year earlier. Yongsan became the only district in Seoul where the average monthly apartment rent exceeded 3 million won based on actual transaction prices.
The increase has been especially pronounced in residential districts surrounding Seoul.
The sharpest gains were recorded in Suwon’s Yeongtong District and Anyang’s Dongan District, both major residential areas in Gyeonggi Province south of Seoul, where lease prices rose 4.57 percent and 4.53 percent, respectively. Seoul’s Seongbuk District followed with a 4.2 percent increase.
The trend is emerging as another source of inflationary pressure in Asia’s fourth-largest economy.
Korea’s consumer price index includes both jeonse and monthly rents under housing costs. Consumer prices rose 2.6 percent in April from a year earlier, while the closely watched cost-of-living index climbed 2.9 percent. Housing, utilities and fuel prices increased 1.7 percent.
While rising housing costs may not immediately drive headline inflation sharply higher, they could increasingly weigh on consumer sentiment as households devote more income to rent payments and housing-related debt costs.
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