Urgent Rental Solutions Needed as South Korea Faces Deepening Housing Crisis

South Korea is grappling with a deepening rental housing crisis, particularly in Seoul, where soaring jeonse (lump-sum deposit) and monthly rent prices are driving up overall housing costs. The current surge in jeonse prices is on track to surpass the levels seen during the 2021 rental crisis, intensifying housing insecurity for many.

The rental demand-supply index for apartments in Seoul reached 125.9 in the fourth week of June, its highest point in five and a half years, indicating demand significantly outstrips supply. This index exceeding 100 signifies more demand than supply, a situation reminiscent of 2021 when the "Lease Inpact" laws led to reduced rental inventory and sharp price increases. The cumulative rise in Seoul apartment jeonse prices this year has already exceeded 5.11%, more than five times the rate during the same period last year. The monthly rent market is similarly tight, with the rental demand-supply index for apartments at 114.8 in May, the highest since June 2021.

This difficulty in securing jeonse contracts is prompting more young people to engage in "yeongkkeul" (all-in) home buying, contributing to recent sharp increases in apartment sales prices in mid-priced Seoul areas and some parts of Gyeonggi Province. The cumulative increase in Seoul apartment sales prices this year has surpassed 5.11%, exceeding last year's figure. This mirrors the 2021 trend of simultaneous rises in both sales and jeonse prices.

The current rental crunch is attributed to a combination of factors, including a decrease in apartment construction and new housing supply in 2022-2024, which is now leading to a shortage of move-in units. Additionally, the accelerating trend of jeonse contracts converting to monthly rentals has further tightened the market. While the government announced plans in May to significantly increase the supply of non-apartment housing, such as urban lifestyle homes, the impact of these measures is not expected until mid-next year at the earliest due to construction timelines.