Multi-family homes and villas push up rents

The rental market for non-apartment housing, including multi-family homes, villas, and officetels, is experiencing a significant surge in Seoul and the surrounding metropolitan area. This trend is intensifying housing challenges for ordinary citizens, mirroring the difficulties seen in the apartment rental market.

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The jeonse and monthly rent prices for multi-family homes and villas, which are relatively cheaper alternatives to apartments, have all risen since the beginning of the year, exacerbating housing difficulties for the working class.

Statistics from the Korea Real Estate Board show that by May, the cumulative year-to-date increase in the jeonse (lump-sum deposit) rent for villas and multi-family homes in Seoul stood at 1.94%, with monthly rents rising by 2.25%. These figures represent a threefold to fourfold increase compared to the same period last year and are rapidly approaching last year's annual growth rates. If current trends continue, the annual rent increase for Seoul's villas and multi-family homes could be the highest since 2021.

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The supply of new non-apartment housing has sharply decreased due to rising construction costs, the impact of jeonse scams, and a sluggish real estate market.

The primary driver behind this escalating rent is a sharp decline in the supply of new non-apartment housing. Factors such as rising construction costs, the lingering impact of "jeonse scams" (rental deposit fraud), and a general slowdown in the real estate market have contributed to this supply crunch. Data from the Ministry of Land, Infrastructure and Transport indicates that new construction starts for non-apartments nationwide from January to May decreased by 5.5% compared to the previous year.

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As a result, the number of new housing starts nationwide for non-apartments from January to May decreased by 5.5% compared to the same period last year.

Compounding the supply issue is an increase in demand from individuals priced out of the more expensive apartment rental market. These individuals are now turning to villas and officetels as alternatives. In response, the government announced a plan in May to expand non-apartment housing supply, aiming to provide 41,000 units in the Seoul metropolitan area by 2027 and 110,000 by 2030 through deregulation and financial support. Additionally, public entities plan to supply 90,000 purchased rental housing units in the metropolitan area by 2027.

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Demand from those pushed out of the apartment jeonse market has increased, pushing them to move to villas and officetels.