South Korea's Non-Apartment Housing Starts Fall 5.5%, Rents Rise Amid Supply Squeeze

The construction of non-apartment housing in South Korea, encompassing townhouses and multi-family units, has seen a notable decline. From January to May, housing starts for these types of residences fell by 5.5% compared to the same period last year, with 12,358 units initiated versus 13,075 in the previous year. The decrease continued into May, with only 2,655 units starting construction, a 15.4% drop from April, signaling a delay in supply recovery.

This reduction in supply follows a sharp decrease in non-apartment construction after the "jeonse" fraud incidents. As fewer units become available, both deposit-based leases (jeonse) and monthly rentals (wolse) have seen price increases. Data from the Korea Real Estate Board shows that townhouse rental prices rose by 0.72% and monthly rents by 1.07% during the same period. In Seoul, the increases were even steeper, with jeonse prices up 2.65% and wolse prices up 3.02%.

The shift towards monthly rentals is also evident in the transaction data. From January to May, wolse transactions accounted for 80.9% of all non-apartment lease deals, a significant increase from the five-year average of 63.6% and a 6% point rise from the previous year's 74.9%. Analysts attribute this trend to a combination of reduced supply and the conversion of jeonse properties to wolse, placing a greater housing burden on low-income individuals and young people.