Real estate
Why investors are moving in on South Korea’s rental boom
8 min read 20 Nov 25
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With swelling rental demand in key Asia Pacific cities, the residential landscape continues to grow for institutional capital, providing the opportunity to help increase high quality housing supply and benefit from the attractive potential risk-adjusted returns that the sector can offer.
The disparate nature of the region’s residential markets allows sophisticated investors to harness the benefits of the more mature investment markets – like Japan – alongside more nascent, potentially higher-return markets and sub-sectors in other developed economies, like Singapore and South Korea.
We see the South Korean living sectors as among the most opportune emerging areas of real estate investment in the Asia Pacific (APAC) region, with the potential to offer early mover benefits. Significantly, South Korea has one of the largest pools of renters globally, with over half of Seoul’s nine million residents living in rented accommodation1. Yet, professionally-managed, residential (multi-family) rental stock is currently marginal, estimated to be less than 0.3% of the country’s overall housing stock2.
“Significantly, South Korea has one of the largest pools of renters globally, with over half of Seoul’s nine million residents living in rented accommodation.”
This stands in contrast to more mature rental markets such as the US, UK and Japan, where professionally managed rental housing comprises 5-10% of total stock – even though renter populations in these countries are typically lower, at around 30%3.
As the structural and regulatory landscape of South Korea’s residential market is now shifting, we explore the market’s unique dynamics and potential opportunity set, including regulatory support for investment in rental residential, momentum behind multi-family and ‘co-living’ models and a structural shift towards monthly rental contracts.
South Korea’s deep renter pool is supported by structural demographic trends
In South Korea, birth rates have declined for decades and are now the lowest globally4. The country’s fertility rate – the average number of children a woman is expected to give birth to during her reproductive life – stood at 0.75 in 20245, making it the only country, along with Singapore (0.97 in 2024)6, with a fertility rate below 1.0
Concerns around career advancement and the financial cost of raising children continue to be key barriers, often resulting in women postponing or forgoing motherhood. Simultaneously, the country is ageing rapidly, with the population aged 65 and above surpassing 20% of the total population at the end of 2024, officially becoming a ‘super-aged’ society, as defined by the United Nations7.
Yet household formation has continued to rise over the last two decades. Each year, an estimated 65,000 people aged 20-30+ move to the Seoul Capital Area for work or study opportunities8, driving demand for rental accommodation. The government has also redoubled efforts to draw more working age population as well as foreign migrants (including international students) into cities to combat population shrinkage, through measures such as improved post-graduation work, a new ‘Top-Tier’ visa system and migration opportunities9. Seoul’s foreign population grew by close to 6% in 2024, after expanding by 10.5% in the previous year10, as a result.
The rise in one- and two-person households over the past decade reflects broader demographic shifts, including increased single living, delayed family formation and longer life expectancy.
“The rise in one- and two-person households over the past decade reflects broader demographic shifts, including increased single living, delayed family formation and longer life expectancy.”
Renting remains more viable than buying a home
Renting remains considerably more viable than buying a home, with Seoul house prices rising by 70% in 2018- 202411. As it stands, the city’s housing affordability is among the most stretched of all Developed APAC (Japan, Australia, South Korea and Singapore) economies. Median house prices compared to the median household income (also known as the Price Income Ratio), stood at 13 times in 202312.
Scope for expansion of an institutional residential rental market
To help address Seoul’s affordability problem and meet demand for housing, the government has introduced policies to encourage the development of an institutional residential rental sector. For example, tax and real estate investment trust rules have been adjusted to incentivise investment in private residential rental schemes. These include VAT exemption on construction costs, as well as exclusion from duplicated corporate acquisition tax.
“To help address Seoul’s affordability problem and meet demand for housing, the government has introduced policies to encourage the development of an institutional residential rental sector.”
Planning incentives, as well as new residential typology recognising multi-family have also been introduced to encourage the development of institutionalised rental housing. As part of this, looser rules have been introduced for residential rental projects which comprise over 20 units for lease and at least 50% of total households using communal cooking areas13. These include reduced minimum unit sizes and lower parking requirements, making development more viable.
To support tenant demand, the government has also introduced financial incentives, such as allowing tenants to deduct up to 15% of monthly rent from their taxable income, depending on gross annual earnings. Additionally, the government is also considering increasing the annual deduction limit from KWR4 million to KWR8 million14.
Traction is gaining with multi-family and ‘co-living’ proof of concept
More renters are beginning to recognise the value proposition of institutional rental housing, particularly the benefits of greater security of tenure, renewal flexibility and a high standard of customer experience – as demonstrated by the success of a number of recently launched multi-family projects. These developments typically comprise multiple apartment units held under continuous ownership (eg, by an institutional landlord) and professionally managed for long-term leases, often starting at one year.
“More renters are beginning to recognise the value proposition of institutional rental housing, particularly the benefits of greater security of tenure, renewal flexibility and a high standard of customer experience...”
Some schemes, especially those with extensive communal amenities such as dining rooms, libraries, pet facilities and screening rooms, have been branded as ‘co-living’ – catering to lifestyle preferences and community-oriented living.
Well-managed, corporate-owned multi-family assets have demonstrated strong performance, with short lease-up periods, high occupancy rates and rents up to 20% higher than those of privately owned residential units and officetels (studio apartments within mixed-use buildings)15. Following the success of early schemes launched between 2016 and 2019, the sector has continued to gain traction, with stock doubling by 202116. Since 2022, more than 50 new projects have been initiated, attracting young professionals and international students17. As the market matures, operators are now in brand-building mode, and the landscape is ripe for institutional managers to emerge.
Multi-family demand looks set to continue to rise
A key driver of demand for multi-family housing is the growing prevalence of single-person and two-person households, with single-person households accounting for 36.1% of Korea’s population in 202418. Foreign residents, comprising working professionals and international students, represent another important tenant base, as they are typically ineligible for Jeonse loans19.
International student inflows grew by an average of 9% annually between 2015 and 2023, far outstripping the expansion of university-operated student housing over the same period20. The government has also set a target to attract 300,000 international students by 2027, further reinforcing demand for professionally managed rental accommodation21.
Taken together, these demographic and policy trends point to sustained growth in the multi-family sector. As the sector matures, there is scope for both highly amenitised co-living projects and more pared-down, high-quality rental schemes to thrive – catering to diverse tenant preferences and lifestyle needs.
Opportunity to create more stock
The opportunity to create more multi-family stock is increasing, with a spike in unsold for-sale apartments by developers since 2022.
Typically, developers use progressive payments from buyers to fund development costs. However, this began to stall from the second half of 2022, with higher interest rates pushing up mortgage rates. As a result, home sales and prices have fallen. The build-to-sell model has further been disrupted as renters start to shift from Jeonse deposits to monthly rent, impacting individual landlords’ purchase ability.
“The build-to-sell model has further been disrupted as renters start to shift from Jeonse deposits to monthly rent, impacting individual landlords’ purchase ability.”
With developers’ pre-sales dwindling, surplus inventory has risen substantially. This growing unsold inventory may prompt developers to hold units for rental or pursue en bloc sales to institutional investors seeking exposure to the residential rental market.
South Korea’s unique Jeonse lump sum rental system
South Korea’s Jeonse system emerged in the 1950s, at a time when the country’s mortgage market was underdeveloped. Under this scheme, tenants pay a large upfront deposit – typically 50–70% of the property’s value – in lieu of monthly rent. The deposit is returned at the end of the lease, usually after two years.
The Jeonse scheme thrived in an era of rising house prices and low interest rates, with 70% of tenants paying Jeonse up till 2020. Tenants typically borrowed Jeonse deposits from parents or banks at low interest rates, making Jeonse more affordable than paying rent every month. It was particularly popular among people in their 20s and 30s, who couldn’t afford to buy a home outright but saw Jeonse as a stepping stone, especially since tenants are often given first refusal to purchase the property in the event of the landlord’s death.
When house prices are rising, landlords are able to return tenants their deposits at the end of the lease by charging new tenants a higher deposit. Some leveraged the system to acquire multiple units, using tenant deposits as a form of interest-free capital. However, as interest rates rose and house prices began to decline from the second half of 2022, Jeonse volumes fell to 2015 levels. For the first time in two decades, landlords had to refund deposits using their own equity. In some cases, overextended landlords were unable to return the full deposit to tenants, leaving tenants exposed to substantial debt.
In response, the government has shifted policy to encourage paying monthly rent over Jeonse. Since 2022, the proportion of tenants paying monthly rent has surpassed 50%, marking a structural shift in South Korea’s rental housing market22.
Potential for expansion of South Korea’s senior living sector
With a supply and demand imbalance of rental accommodation among older renters, we also see increasing potential for the expansion of South Korea’s senior living sector. In the past, elderly parents in APAC often lived with their children and grandchildren. However, this model is changing as more people remain childless and single-person elderly households rise.
“In the past, elderly parents in APAC often lived with their children and grandchildren. However, this model is changing as more people remain childless and single-person elderly households rise.”
Currently, the population aged 65 and over in South Korea is growing at approximately 5% per year, with the majority living alone in rented housing23. Yet, non-assisted senior housing provision remains limited at 0.1%, versus 2% in Japan and 4.8% in the US24. What’s more, existing supply tends to target affluent seniors, leaving a gap in provision for middle-income and lower-income groups. We therefore see an opportunity to develop more quality housing for a broader group of seniors.
South Korean living sectors could provide a compelling investment opportunity for early movers
We believe South Korea’s living sectors offer a compelling investment opportunity through the creation of high-quality accommodation that meets the specific needs of the various cohorts of the country’s growing rental population. With structural and regulatory shifts increasingly supporting the development of an institutional rental market, investors that enter the market at this stage in its evolution could take advantage of early mover benefits, including attractive pricing metrics and the ability to acquire strategic assets and forge key market relationships. We therefore believe incorporating South Korea living sectors as part of a well-diversified APAC strategy has the potential to enhance risk-adjusted returns.
1National Statistical Portal, (kosis.kr), as of January 2025.
2Ministry of Land, Infrastructure and Transport, JLL, as of January 2025.
3PMA, as of November 2024.
4United Nations Department of Economic and Social Affairs, Population Division, ‘2024 Revision of World Population Prospects’, (population.un.org), as of January 2025.
5Jeong Min Nam and Ri-Ahn Kim, ‘South Korea’s birth rate hits record low’, (kedglobal.com), February 2025.
6Singapore Department of Statistics, ‘Latest Data on Births and Fertility’, (singstat.gov.sg), as of January 2025.
7According to the United Nations, a super-aged society is one in which more than 20% of the population is 65 or older. Those with over 14% and 7% are defined as aged and ageing societies respectively. Source: National Statistical Portal, (kosis.kr), as of February 2025.
8Jeong Seok-woo, ‘I came to the metropolitan area looking for a job, but... the company said, “We're hiring experienced candidates.”’, (chosun.com), September 2025.
9This visa, aimed at highly skilled international professionals in advanced industries like biotechnology, semiconductors and secondary batteries, offers a long-term residency visa and allows for easy access to permanent residency after three years. Source: Jung Min-ho, ‘Korea to introduce 'top-tier visa' to attract tech experts’, (koreatimes.co.kr), March 2025.
10Kang Woo-ryang and Kim Seo-young, ‘S. Korea's population rises for 2nd year on foreign influx’, (chosun.com), July 2025.
11Korea Real Estate Board, ‘Statistics Inquiry’, (reb.or.kr), as of January 2025.
12Park ji-youn, ‘Seoul homebuyers need 13 years of salary savings, ownership rate drops to 60.7%’, (biz.chosun.com), December 2024.
13PMA, Ministry of Land, Infrastructure and Transport, as of May 2025.
14Bloomberg Tax, ‘South Korea Assembly Considers Bill to Increase Deductions for Repayment of Housing Rental Loans’, (news.bloombergtax.com), July 2023.
15Savills, ‘Korea Co-living 1H/2023’, (savills.com.sg), June 2023.
16Student housing provision in South Korea remains underdeveloped compared to European countries, for example. Students typically reside in limited university-owned accommodation, rental housing owned by individual landlords (which can be difficult for international students to navigate) or professionally managed multi-family or ‘co-living’ accommodation. Source: Savills, ‘Korea Co-living 1H/2023’, (savills.com.sg), June 2023.
17PMA, as of March 2025.
18Ryu Youngwook, ‘The era of 3 million elderly living alone... households with 4 or more people are gradually shrinking’, (mk.co.kr), July 2025.
19Jeonse loans, offered by banks at preferential interest rates, enable tenants to raise the lump-sum deposits required under South Korea’s Jeonse rental system, where upfront capital is paid in lieu of monthly rent.
20PMA, as of November 2024.
21Choi Jeong-yoon, ‘Foreign students in South Korea top 250,000 for 1st time’, (koreaherald.com), September 2025.
22Supreme Court of Justice, (data.iros.go.kr), as of August 2025.
23Supreme Court of Justice, (data.iros.go.kr), as of August 2025.
24PMA, as of November 2024.
25PMA, as of January 2025.
The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested. Past performance is not a guide to future performance. The views expressed in this document should not be taken as a recommendation, advice or forecast.
