1. the statistics prove the charter apocalypse: The shockwave of the '60s

the end of the age of rentingis now an inescapable reality. long referred to in real estate circles as a backward form of private finance, it has long been expected that charters would one day meet their fate with the development of institutional mortgages, but the pace has been accelerating much faster than we expected in recent years.

according to the Supreme Court Registry Information Plaza, the number of residential lease contracts with a confirmed date nationwide by July 2024 already exceeds one million, breaking the record for the shortest period of time since the statistics have been kept. Nationally, the proportion of contracts with rent has reached 61.9%, overwhelming charter (38.1%). In Seoul, a barometer of the nation's real estate market, the proportion of contracts with rent has soared to 64.1%, showing how rapid the shift from charterto rent has been.

this demiseof rentalsis the result of a combination of factors. after the implementation of the Rent Act 3 in July 2020, the price of sublets skyrocketed, pushing tenants into renting. The subsequent high interest rate environment made subletting interest burdensome, and more tenants opted for the fixed cost of renting.

furthermore, it is the shrinking supply of rentals that has decisively accelerated the rate at which homes are being rented out. in the past, gap investments served an important function of supplying sublets, but strong real estate regulation, coupled with a reduction in the amount of mortgages that landlords can take out to recoup rent, has effectively cut off gap investments. with the private function of supplying rentals gone, charter volume itself plummeted, and the market quickly reorganized around renting.

of course, there was a positive side effect : the end of charter fraud. with the shadow banking of subletting gone, tenants are less at risk of losing their entire property, but there's an inevitable negative backlash. as the high-cost structure of housing becomes more entrenched, life for homeless renters becomes even tighter.

2. young people's cry: the 'private leverage' of homeownership is gone

renting was a gateway to asset building

for many young adults, renting has served as a "private lever" to help them overcome the barriersto homeownership: they could keep a deposit and use it to move from place to place, saving or investing in other ways to build equity without borrowing.

but with the advent of the renting era, this is disappearing. when you're spending 30% to 50% of your salary on rent every month, as is the case in developed countries, your disposable income shrinks dramatically, making it impossible to save. this puts extreme pressure on young people to take the leap, abandoning the traditional pattern of renting for a few years and saving up to buy their own home.

the reason why young people have been buying homes recently despite the interest rate burden may be because they are tired of paying rent, which makes the desire for homeownership all the more urgent. the rising rent burden and the"homeownership dream" of having to pay a perishable expense every month is a scarier reality than the interest rate burden.

the risk of structural rent lock-in

beyond simply making housing more expensive, this rent-seeking behavior has serious implications for social vitality. without the initial asset-building scaffolding that subletting provided, young adults are more likely to be locked into a lifetime of housing instability. as savings become impossible to come by, there is a risk that the current housing insecurity will be passed on to their children's generations, creating a structural "rent-generation " phenomenon. to end housing insecurity for young adults, we need more than simple lending deregulation; we need fundamental supply and financing alternatives to increase housing stability.

3. solutions to breaking the rent cycle: ultra-long-term mortgages and equity-based housing

3.1. Ultra-long-term mortgages: a financial innovation that dramatically reduces monthly burdens

revitalizing institutional financial products to replace the private financial functions that disappeared withthe end of rentingis an essential task in the era of renting, and the introduction of ultra-long-term mortgagesis at the core of this.

low down payment products that allow people to buy a home with a down payment as low as 10% of the home price, as is the case in the US, and ultra-long term mortgages with maturities of 40 years or more need to be revitalized.

these ultra-long mortgages provide realistic help for homebuyers. by extending the maturity beyond 40 years, the annual principal payment is reduced in the calculation of the debt-to-income ratio (DSR), which increases the loan limit and dramatically reduces the monthly payment burden. for example, a 40-year term can significantly reduce monthly payments compared to a 30-year term, which can actually increase purchasing power for younger generations. this is the most realistic financing option for getting on the pathto homeownership.

of course, the longer the repayment period, the higher the total amount of interest the borrower has to pay, which is a double cost. Therefore, ultra-long-term mortgage products must have a flexible repayment structure that allows borrowers to pay off the principal faster and without early repayment penalties as their lifetime income increases.

3.2. Combine equity sales with housing welfare

to overcome the reality that high new home prices make home ownership a 'pipe dream' for people in their 20s and 30s, equity-based home ownership schemes should be expanded. This is a system in which a person initially owns only a small share of the home (e.g. 20-25%) and increases the remaining share over time. you pay monthly rent for the unsold portion, providing both housing stability and the opportunity for home ownership.

it is also important to increase housing welfare support, or housing voucher support, for marginalized groups who cannot afford to purchase a home. addressing youth housing shortagescan only be achieved through a three-pronged policy that combines housing welfare and homeownership support.

4. old Age Survival Strategy: Pay Attention to 'Rent-Switching Apartments'

changes in the need and evaluation criteria for retirement housing

for retirees without a fixed income, rent expenses are devastating. the risingmonthly rent burdenis one of the biggest obstacles to retirement living. owning your own home in your later years is an essential part of retirement, as it provides a safe haven from monthly expenses, regardless of whether prices rise or fall.

theage of rentingcreates a real estate paradigm shiftin real estate valuation. it shifts from the traditional market appreciation (capital gains) to cash flow, which means that the basis of apartment valuation becomes "return on investment to rent". this will likely lead to the rise of the income approach, which estimates the fair value of an apartment based on expected future returns.

whereas rental housing was an "equity type of housing" that aims to capitalize on market price gains, rented housing is more like a "bond type of housing" that receives regular rent.

strategies for maximizing rental income

you should focus on the possibility of renting out your home in the future, as opposed to living in it, and keep an eye out for so-called "rent-to-own" apartments.

these apartments are located in locations that renters prefer, such as a double station area with convenient transportation or a "large complex + new apartment" adjacent to a business district, to maximize rental yields. the gap in sales prices between these rent-to-own apartments andhomes that are not will widen in the long run.

for renters, apartment gentrification is a sad reality, but for retirees, it can be a strategic opportunity to leverage their home as another income-producing financial instrument. it's important to keep in mind that rental yieldswill be a key determinant of where you choose to live in the future.

5. FAQ: in the age of renting, what readers want to know most

Q1. Won't my total interest burden be too high if I take out an ultra-long term mortgage?

A. While a longer-term loan will ease your immediate homeownership challenges by reducing your monthly repayment burden, it will increase your total interest payments, so it's important to choose a flexible product that allows you to pay off the principal early without penalty whenever your income increases. you should also take advantage of any early repayment penalty waiver provisions in your policy mortgage product.

Q2. Will end of lease completely eliminate the risk of tin can leasing?

A. The end of rentals and the rise of renting may contribute to the end of tin can rentals or large-scale rental fraud. this is because renting requires less of a security deposit, which reduces the risk of a tenant losing their entire property. However, there is still a risk of nonreturn of security deposits in the case of high-deposit renting (reverse renting), so it is important to check for security products such as HUG.

Q3. Which apartments have an advantage if the rental yield is an important evaluation criterion?

A. In the era of cash flow-driven renting, location becomes more important. apartments that can secure a steady stream of rental demand, such as those near prime business districts and in station areas with convenient transportation, will be more valuable.

the bottom line: the age of rent, time to rethink your survival strategy

the age of rentingis not just a shift in housing, but a fundamental real estate paradigm shift inthe real estate market. as the private leverage of renting disappears, the difficultiesof young people to buytheir own homeintensify, and the need forretirement housingbecomes more urgent for retirees.

to survive this shift, governments will need to provide innovative financing and supply solutions, such as ultra-long-term mortgages and shared ownership. For individuals, it's time to reshape their housing plans and investment strategies, with rental yieldas a key criteria.

what is your survival strategy in the age of rent?