This article was published on April 24, 2025, at 2:59 p.m. on the ChosunBiz MoneyMove site.
Foreign investors who have focused on commercial real estate investments such as offices and hotels in the country are sequentially entering the rental housing market. This is interpreted as a reaction to the rapid increase in one- to two-person households and the growing demand for monthly rent due to instability in the jeonse market, leading to shifts in the market. There is also a perspective that the relatively low monthly rent in major cities of our country compared to developed countries presents a high growth opportunity.
According to the investment banking (IB) industry on the 24th, the Canada Pension Plan Investment Board (CPPIB) is planning to develop corporate rental housing in four areas of Dongdaemun, Seongdong, Yeongdeungpo, and Jung-gu in Seoul in collaboration with domestic developer MGRV. The project will involve a total of 1,500 units, with a business cost reaching 1 trillion won. They established a joint venture (JV) for the development of the rental housing business with a capital of 500 billion won, with respective equity stakes of 95% and 5%. The Canada Pension Plan Investment Board, one of the world's top 10 pension funds, had assets under management (AUM) totaling 675.1 billion Canadian dollars (approximately 695 trillion won) as of the third quarter of last year.
Hines, a U.S. developer and one of the world's top three real estate investment firms, is preparing a rental housing business after recently acquiring a 106-unit officetel in the Sinchon area of Seoul. The plan is to supply rental housing targeting one- to two-person households, boasting high-quality management services. Hines operates assets worth $93 billion in 30 countries worldwide; until now, it has only dealt with commercial real estate, including offices in the country. This investment is also the first case of a foreign real estate developer entering the rental housing market in Korea.
Global investment banks have also thrown their hats into the rental housing market. Morgan Stanley, one of the world's top three investment banks, is investing in the rental housing business in collaboration with Gravity Asset Management. It has begun acquiring officetel in Gil-dong, followed by acquisitions in Doksan-dong and Anam-dong, and is pushing to remodel them into rental housing with real estate operators SK D&D and Homes Company. Global private equity fund Kohlberg Kravis Roberts (KKR), with $870 trillion in assets under management, also established a joint venture last year with the Hong Kong-based co-living company WeLive, launching an investment in rental housing.
The accelerated entry of foreign capital into the domestic rental market is analyzed as an attempt to capture the rapidly growing monthly rent market. The recent fraud cases in the jeonse (lease deposit) system have led to a growing reluctance toward this unique aspect of Korean culture, making the preference for monthly rent more pronounced. As one- to two-person households and financially constrained end-users turn their attention to monthly rent, transactions are increasing, and prices are surging.
According to the Ministry of Land, Infrastructure and Transport, the proportion of monthly rent (including guaranteed monthly rent, etc.) in nationwide rental transactions from January to February this year was 61.4%. This is the first time since the proportion of monthly rent exceeded 40% in 2015 that it has broken through 60% after a decade. The monthly rent for apartments, for which statistics can be tracked, is also continuously rising. According to KB Real Estate, the apartment monthly rent index in Seoul rose by 0.6 points compared to the previous month to 121.5, marking the highest level since KB Real Estate began compiling related statistics in December 2015.
The government's introduction of various measures to activate the rental housing market is positively impacting this trend. The Ministry of Land, Infrastructure and Transport announced last August that it would supply more than 100,000 units of corporate rental housing by 2035. It has also actively opened the rental housing market, which had previously been publicly operated, to private entities, easing regulations to allow corporations with financial strength and expertise to participate in large-scale long-term rental projects.
An industry official noted, "Unlike developed countries where the private rental market accounts for 30% to 40% of the overall housing market, in our country, it is only about 1%, but the role of corporations is expected to grow in the future." The official added, "However, domestic developers, construction companies, and project managers have primarily focused on sales projects, so for Korean companies to be competitive in the rental market, rental price regulations would need to be eased."