Last month, the nationwide rental price-to-value ratio approached 70%, marking the highest level in 2 years and 4 months. The rental price-to-value ratio is an indicator that represents the ratio of rental prices to sales prices.
The rise in the rental price-to-value ratio means that the burden on rental tenants is increasing in the market. Additionally, as the price gap between sales and rentals narrows, it also stimulates the desire of actual buyers to convert to purchasing and gap investment (buying with a rental contract). In Seoul, 7 districts, including Jungnang-gu and Guro-gu, surpassed a rental price-to-value ratio of 60%, while the rental price-to-value ratios in the cities of Icheon and Yeoju in Gyeonggi Province exceeded 80%, the highest among cities and provinces nationwide.
According to RealHouse, a real estate evaluation company, and the National Statistical Office, the nationwide rental price-to-value ratio recorded 68.2% in April. If the sales price of an apartment is 1 billion won, this means the rental price is 682 million won. This marks the same level as December 2022 (68.2%) and is the highest level in 2 years and 4 months. The rental price-to-value ratio has been increasing for 7 consecutive months since recording 67.5% in September of last year.
By region, the rental price-to-value ratio in the metropolitan area, including Seoul, Incheon, and Gyeonggi Province, is 62.5%, while the ratio in Seoul is 54%, lower than the national average. Looking at Seoul by district, 7 out of 25 districts have rental price-to-value ratios exceeding 60%, indicating relatively high ratios. Jungnang-gu has the highest ratio at 63.4%, followed by Guro-gu (62.7%), Gangbuk-gu (62.5%), Jongno-gu (62.1%), Jung-gu (61.4%), Eunpyeong-gu (60.2%), and Gwanak-gu (60.1%), which are also areas with high rental price-to-value ratios.
In Gyeonggi Province, the rental price-to-value ratios in Yeoju City and Icheon City exceeded 80%. Icheon City recorded 83.5%, and Yeoju City recorded 81%. Even when looking at Seoul, six major cities, one special self-governing city, six provinces, and three special self-governing districts, these two places are the only ones with rental price-to-value ratios exceeding 80%.
The demand for rentals, influenced by the location of the headquarters of SK hynix in Icheon City and its partner companies, is analyzed as a factor leading to the increase in rental price-to-value ratios.
Kim Hak-ryeol, head of Smart Tube Real Estate Research Institute, said, "Yeoju and Icheon have a lot of existing apartments, and there has been a significant supply of new constructions in the last 2 to 3 years," adding, "This oversupply has resulted in sales prices and rental prices being almost at the same level, or even rental prices exceeding sales prices in some cases."
Kim noted, "Especially in Icheon, due to the influence of SK hynix, many people purchase rentals at high prices instead of buying homes." Park Ji-min, head of Woolyong Subscription Research Institute, explained, "The high rental price-to-value ratios in Yeoju City and Icheon City are due to many people being dispatched to corporations like SK hynix for about 3 to 7 years and returning to their original regions without buying homes, leading them to opt for renting instead."
Meanwhile, Gyeonggi Province had warned last May that there were concerns about 'negative rentals' in some areas with high rental price-to-value ratios, such as Icheon and Yeoju. A negative rental refers to the situation where the sales price of a property falls or the rental price-to-value ratio is excessively high, leading to homeowners being unable to return rental deposits.
On the other hand, regions with high rental price-to-value ratios include Jeollabuk-do (78.9%), Chungcheongbuk-do (78.6%), and Dong-gu, Incheon (77.5%). Ham Young-jin, head of the real estate research lab at Woori Bank, explained, "Regions with high rental price-to-value ratios can be seen as places where utility value (residential) and purchase value (investment) are almost similar."