Is My Monthly Rent Becoming Foreign Dividends?…Global Heavyweights Flock to Korea Amid 'Jeonse-to-Rent' Shift [Real Estate A to Z]

Cushman & Wakefield Survey of Institutional Investors
Korea Ranks 4th Among Most Preferred Investment Destinations in Asia-Pacific
"Rising Demand for Co-Living Amid Increase in Single-Person Households and Housing Cost Burden"

As the trend of converting jeonse (lump-sum deposits) to monthly rent accelerates and rental prices rise, global institutional investors are making inroads into the Korean rental market. The monthly rent paid by domestic tenants has emerged as a stable income source for foreign investors. However, concerns have been raised that if institutional capital acquires a large volume of existing housing, the supply of properties on the market could decrease and further drive up rental prices.

On the 28th, in front of Sungkyunkwan University in Seoul, a real estate agency displayed monthly rent prices for one-room studios ahead of the start of the second semester. Photo by Yonhap News

According to the real estate industry on August 30, Cushman & Wakefield, a global real estate consulting firm, recently released the results of its "2026 Asia-Pacific (APAC) Residential Investor Survey." In the survey, Korea ranked fourth among the most preferred investment destinations selected by investors in the Asia-Pacific region.

Australia and New Zealand took first place with a score of 6.27 out of 7. Japan ranked second (5.49 points), followed by Singapore in third (4.27 points), Hong Kong in fifth (3.61 points), India in sixth (2.39 points), and mainland China in seventh (2.00 points).

As this survey was conducted for the first time this year, direct comparison with previous figures is not possible. The survey targeted institutional investors, fund managers, listed real estate companies, and residential-focused investors in the Asia-Pacific region. The total number of responding institutions was not disclosed.

Preferred Investment Regions in the Residential Sector of Asia-Pacific. Cushman & Wakefield

"Conversion to Monthly Rent Creates Investment Conditions"

Cushman & Wakefield pointed out that "the transition from jeonse to monthly rent, combined with demographic changes, is drawing increasing attention from institutional investors to the Korean residential sector."

Cushman & Wakefield stated, "The number of monthly rent transactions in Seoul has more than doubled compared to ten years ago," adding, "Changes from jeonse to monthly rent, alongside factors such as demographics and housing costs, are creating an environment conducive to investment by both domestic and foreign capital."

In reality, both jeonse and monthly rent prices are rising rapidly. According to a survey by Korea Real Estate Board as of the fourth week of August (24th), the jeonse price for apartments in Seoul increased by 0.22% in just one week. This rate is higher than the previous week’s increase of 0.19%. Monthly rent is also rising. In a July survey, the average monthly rent for apartments in the Gangbuk area of Seoul was 1,522,000 won. This represents an 11.3% increase compared to the same month last year. For the first time since this statistic was tracked in 2015, the average monthly rent surpassed 1.5 million won.

Conversely, the number of listings is decreasing. According to big data firm Asil, as of August 28, the number of apartment monthly rent listings in Seoul was 17,194, down approximately 12% from a year ago. Jeonse listings also dropped by about 12%, from 23,216 a year earlier to 20,256 currently.

Major Global Investors Have Already Entered... Adjusting Pace Due to Regulation

The entry of foreign capital has already begun. The report notes that global pension funds, sovereign wealth funds, and private equity funds have entered the domestic market by acquiring stakes in rental housing operators and converting properties to rental housing.

Seoul has been identified as one of the most prominent cities in Asia for co-living (shared housing) demand, driven by the increase in single-person households and the burden of housing costs. Cushman & Wakefield analyzed that "the discussion has shifted from whether institutional capital will enter Korea to how quickly they can scale up their investments."

Among responding institutions in the Asia-Pacific region, 85% indicated they plan to increase residential investments over the next five years. Of these, 39% plan a significant increase, while 46% plan a modest increase. Their projected residential investment over the next five years amounts to USD 33.2 billion.

Institutional investors typically purchase multiple homes for rent, recovering returns through rental profits distributed to shareholders and capital gains from sales. In rental housing owned by foreign capital, after taxes such as acquisition and property tax, a substantial portion of the rental revenue is distributed to foreign investors. Thus, the monthly rent paid by domestic tenants becomes a source of income for foreign pension funds.

On March 8, 2021, college students marched in Jongno-gu, Seoul, carrying boxes labeled with phrases such as "monthly rent" and "living expenses." Photo by The Asia Business Daily

In terms of investment targets, corporate rental housing and multi-family rental housing accounted for the largest share at 34%. Co-living took up 23%, and student housing 22%. Shared housing complexes that reduce private room sizes and expand communal spaces such as kitchens and living rooms were identified as products that can easily enhance rental profitability in high-rent areas like downtown Seoul.

The entry strategies are also becoming more specific. Due to the shortage of corporate rental housing properties in Asian markets other than Japan, 73% of respondents said they are considering acquiring offices or hotels to convert into rental housing. For the most likely deal forms over the next one to three years, 34% selected joint ventures with local companies.

However, some analysts suggest that the stricter housing regulations implemented in the second half of last year could slow the pace of foreign capital investment in the domestic rental housing market. Due to the October 15th policy, Seoul has been designated a regulated area, resulting in increased acquisition tax burdens for new home purchases and reduced benefits for comprehensive real estate tax.

The Korea Capital Market Institute, in a report published last May, assessed that rising costs of acquiring and holding rental housing have reduced investment profitability, prompting foreign institutional investors to put new investments on hold. However, rather than completely withdrawing from the market, global capital is more likely to selectively invest in high-quality assets that can offset the increased tax burden.

Overseas: Higher Taxes and Regulation on Rental Practices

In countries where corporate capital has entered the housing market en masse, side effects such as rising rents and exploitative fees have surfaced, prompting the introduction of regulatory measures.

In Berlin, Germany, massive purchases of rental housing by large real estate companies led to sharp increases in rent and provoked public backlash. Amid growing controversy over rising housing costs, the Berlin parliament passed a bill in March of this year establishing the framework to transfer corporate-owned housing into public ownership. This came in response to a 2021 referendum in which 56.4% voted in favor of transferring properties owned by companies with more than 3,000 units into public hands. This is an example of how legal frameworks for public acquisition were established after large-scale capital absorbed housing stock, increasing the burden on tenants.

Invitation Homes, the largest single-family home rental company in the United States, was investigated by authorities after it was caught concealing mandatory service fees separately from advertised monthly rent amounts in property listings. The company agreed to pay the Federal Trade Commission (FTC) USD 48 million to reimburse affected tenants. The FTC began distributing USD 47.2 million to more than 440,000 victims in March this year.

Ireland introduced a new stamp duty system in 2021 to curb bulk housing purchases by institutional investors. If a single buyer acquires 10 or more properties in a 12-month period, a rate of 10% is applied. As of October 2024, the rate was increased to 15%. However, apartments are excluded from this taxation.

This content was produced with the assistance of AI translation services.