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Rental housing policy in response to the increase in the share of wolse (Monthly lease)

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  • Rental housing policy in response to the increase in the share of wolse (Monthly lease)
  • Korea Development Institute
  • Korea Development Institute


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Title Rental housing policy in response to the increase in the share of wolse (Monthly lease)
Similar Titles
Material Type Video
Author(English)

Korea Development Institute

Publisher

[Sejong] : Korea Development Institute

Date 2017-09
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Industry and Technology < General
Government and Law < Political Development
Holding Korea Development Institute
License

Abstract

The share of monthly leases, or wolse (월세) in Korean, is making a notable increase in Korea’s rental housing market, marking 60.5% as of 2016. Meanwhile that of jeonse(전세), or lump-sum deposits without monthly rent, is on the decline. A major driver of the growth in wolse is low interest rates. To be more specific, low rates mean low returns, and ultimately, this means less profit to the lessors. Moreover, Facing rising jeonse prices and tenants’ limited options, the rental market gives the bargaining power to lessors The increasing share of wolse is particularly noticeable among the young and senior populations. This is because both age groups shoulder a bigger burden in terms of financial and credit constraints, and have a narrower choice of housing. In addition, although wolse has a smaller deposit compared to jeonse, the monthly rent payments can weigh heavily on households’ housing expenditure. The proportion of housing expenditure in current income can be understood through the rent-to-income ratio, or RIR. Low-income young and senior wolse tenants have a higher RIR than other age groups, posting 34.2% and 37.7%, respectively. In particular, it was found that seniors in the lowest first and second income decile were spending over 50% of their monthly income on housing.