This undated file photo shows apartment buildings in Seoul. (Yonhap)
SEOUL, July 21 (Korea Bizwire) — The number of real estate rental contracts shot up in Seoul this year amid an unprecedented drop in the real estate transaction market, data showed Wednesday.
According to statistics from the National Court Administration, the number of real estate lease contracts signed in the first half of this year totaled 464,684 cases, up 31.1 percent from a year ago.
In particular, the number of monthly home lease contracts, called “weolse” in Korea, reached an all-time high at 246,064, up 55.2 percent from a year ago.
This was the first that the number of weolse contracts was higher than that of jeonse contracts, or a home rental arrangement unique to South Korea.
Under the country’s decades-old jeonse system, tenants pay a large lump-sum deposit, known as key money, to the landlord, which is then returned at the end of the rental agreement, which usually lasts two years.
During the lease period, the tenants do not pay monthly rent.
Key factors behind the hike in weolse contracts include stricter loan regulations, higher interest rates, and an increase in the number of cases where the weolse payment is lower than the monthly interest payment for a jeonse loan.
As interest rates started picking up steadily from late last year, not only landlords but also tenants are showing a preference towards weolse contracts rather than jeonse.
“Tenants’ preference towards jeonse or wolse rather than buying homes is expected to lead to a gradual increase in rental prices,” said Park Hap-soo, an adjunct professor at Konkuk University Real Estate Graduate School.
Ashley Song (ashley@koreabizwire.com)
