January 12, 2011

Lack of housing causes increase in rental prices

In metropolitan areas, including Seoul, the price for leasing a small apartment or studio has risen dramatically in the past year due to a serious shortage in rental housing. Last year in Seoul, a newly constructed two-bedroom apartment could be leased long-term with 70 million won but the same apartment now costs more than 100 million won for a long-term lease.

In Korea, there are two ways to rent a house: 전세(cheon-se) and 월세 (weol-se). 전세 is a long-term lease system that requires a large amount of “key money” to be paid upfront upon signing the lease, and 월세 is a monthly rent system which requires a smaller amount of key money plus a monthly rent fee. Both the key money and lease price on small apartments near subway stations has nearly doubled and the space is extremely expensive to purchase. As the shortage in rental housing increases, there is also a price increase in multiplex housing, especially in major areas of Seoul such as Hwagok-dong, Gangseo-gu, Sinsa-dong, Jung-gu, Sadang-dong, Dongjak-gu, Jayang-dong, Gwangjin-gu where the amount of money required for any type of rental has increased to 80% of its sale price. According to Maeil Business News, one real estate business claimed that the leasing price for one apartment increased by 20 million won in just ten minutes.

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