[Edaily Marketin YunJi Kim Reporter Park So-young] The shift to a monthly rent system, the rise in single-person households, and an aging population...

These are the reasons why global institutional investors have begun to set their sights on the Korean rental housing market. As residential assets that generate monthly cash flow have emerged as a major target for alternative investments, the Korean rental market—which was previously centered on jeonse (lump-sum deposit leases)—is gradually shifting toward monthly rent, making it a rising “blue ocean.”

According to E-Daily’s own tally on the 10th, there have been at least eight instances from the second half of last year through July of this year in which global institutional investors and major asset management firms have established funds or made investments in the domestic rental housing market. Even excluding one case where the amount was not disclosed, approximately 1.3 trillion won has flowed into the Korean rental housing market over the past year.

TPG Asia Real Estate, a U.S.-based alternative investment manager, partnered last month with WeLive, a Hong Kong-based residential property operator, to develop a 550-unit rental residential complex in Jongno-gu, Seoul. Earlier, in May, U.S.-based Nubin Asset Management also made its debut in the Korean residential real estate market by acquiring a 62-unit residential complex in downtown Seoul in partnership with WeLive. KKR, the Government of Singapore Investment Corporation (GIC), and APG, a Dutch pension fund manager, have also begun entering the domestic rental housing market. While they initially focused on acquiring and operating existing buildings, they are now participating from the development stage onward, indicating a shift toward more proactive business strategies.

This trend is intertwined with structural changes in the Korean rental housing market. As jeonse (lump-sum deposit leases) decline and monthly rent leases increase, rental housing is shifting from an asset class aimed at capital gains from rising home prices to a cash-flow asset that generates monthly rental income. The growing demand for small residential units in downtown Seoul, driven by the rise in one- and two-person households, is also boosting the market’s investment appeal.

Regulatory and tax burdens remain variables. Analysts note that as the government tightens regulations to curb rising home prices and tax burdens increase, these factors could act as obstacles to investment. However, the industry expects interest from global investors to continue, given the accelerating structural changes in the rental market.

Another advantage cited is that, while multifamily rental housing has already become a common investment target in the U.S. and Europe, the rental housing market in Korea is still dominated by individual landlords, meaning the professional rental housing market operated by institutional investors is still in its early stages.

An official from a global asset management firm stated, “Despite the regulatory burden, institutions are paying close attention to the ongoing structural shift from jeonse (lump-sum deposit leases) to monthly rent,” adding, “As the proportion of monthly rent increases, it becomes possible to secure a relatively stable cash flow through rent, which could enhance the investment appeal of residential assets.”