in recent years, more and more young people have been buying homes despite high mortgage rates. Some say it's hard to understand, but maybe the reason is simple. it's because they're tired of paying rent every month, and the desire to own their own home has become more urgent. The fear of not having a home is more frightening than the fear of paying interest rates. this is the age of renting.

once thought of as a distant future, the rentalization of housing has arrived at a much faster pace than we thought, and it's not just one-room houses and townhouses, but also the apartment market. a number of factors are converging to hasten the "end of rentals," including the Rent 3 Act, rising possession taxes, and restrictions on rental lending.

this massive real estate paradigm shift is hitting us both in the face.

table of Contents

  1. why does the 'charter apocalypse' bring both sadness and opportunity?

    • the positive sign: the end of 'charter fraud'

    • the negative reality: high-cost housing for '50% of your salary'

  2. is the 'homeownership ladder' really gone?

    • the younger generations are the missing link

    • why 'home ownership' is a must for retirees

  3. new solutions in the age of rent: 'ultra-long term mortgages' and 'rent-to-own'

    • 'Home ownership' for just 10%: the need for ultra-long term mortgages

    • from 'equity' to 'bond': the new standard for apartment values

'The end of subletting', why sadness and opportunity coexist?

for a long time, real estate academics have been calling subletting a "backward private finance" and predicting its demise. the idea was that with the development of institutional finance (mortgages), private mortgages - buying a home with a tenant's money - would inevitably disappear.

however, the introduction of 'buy-to-let loans' around 2009 and the 'gap investments' that built on them have miraculously extended the life of the buy-to-let system, with gap investments boosting the supply of buy-to-let and buy-to-let loans supporting the demand.

but now that chain is breaking. with the brakes on reckless charter lending, and the growing negative perception of gap investing, the 'charter to rent' movement has become irresistible.

positive signs: the end of 'charter fraud'

the most positive change that the end of rentals brings is arguably the end of rental fraud. tin can rentals and malicious rental scams that can wipe out your entire life savings in an instant are only possible because of the way the rental system is structured. a complete shift to the rent-to-own era is a clear step forward, at least in terms of breaking the fundamental link to these horrific scams.

the negative reality: high-cost housing for '50% of your salary'

however, the void left by shadow banking is filled by a harsh "high-cost housing structure". like in the US or Europe, you could be faced with paying 30% to as much as 50% of your salary in rent.

this fixed monthly housing expense drastically reduces disposable income. it can become commonplace for people to literally "live paycheck to paycheck," struggling to make ends meet, let alone save. beyond individual misery, this can lead to a societal contraction in consumption and a decline in economic vitality.

is the 'home ownership ladder' really gone?

renting used to be more than just a form of housing - it was the 'rung on the ladder to owning your own home' and most certainly the 'private lever'.

the younger generation has lost the ladder

our parents' generation was able to 'stair-step' to homeownership. they'd live in a cheaper rental, save up enough money to buy a house (a gap investment), and then move to a more upscale neighborhood a few years later when prices rose.

but the renting era has kicked this "ladder" to the curb. it has become impossible to save money while spending a significant portion of your income on rent every month. In the face of this huge gap, where you have to jump from 'renting' to 'owning your own home', owning a home is becoming 'unappealing' to young people. this is the essence of the 'youth housing shortage'.

why 'home ownership' is essential for retirees

there is a saying that 'you know a day is short when you are unemployed, and you know a month is short when you pay rent'. when you're young, you can afford rent because you have an income. but the 'retirement housing crunch' is a different story when you lose your steady income.

imagine paying rent month after month, year after year, until you're too old to afford it. the thought of growing old, packing up and moving is terrifying.

in the age of renting, the need for senior housing is absolute. whether prices are rising or falling, your home is your last bastion and hill to climb as you age in place. In fact, in one survey, 92% of U.S. seniors ranked "homeownership" as their top housing preference.

new solutions for the rent era: 'ultra-long term mortgages' and 'rent yield'

so, is there a solution to this desperate rent era? we need to look for new avenues in two directions. they are 'policy support' and 'a change in personal investment perspective'.

'Home ownership' for 10%: the need for ultra-long-term mortgages

public finance needs to fill the gap left by private finance, and the key to this is the revitalization of ultra-long-term mortgages.

like in the US, there should be ultra-long-term mortgage products with 40-50 year maturities that allow people to buy their own home with just 10% of the house price. This would restore the broken 'rent to own' ladder by providing a more affordable option than paying high rents.

of course, this is not enough. new homes that have become overpriced can be the icing on the cake. expanding the 'share-based sales' system, which allows people to buy only a partial stake at first and increase their stake over a long period of time, and supporting 'housing vouchers' for the marginalized who cannot afford to buy a home, will help solve the 'housing shortage of 20- and 30-somethings'.

from 'equity' to 'bond': the new standard for apartment values

the era of renting will change the way apartments are valued. If apartments in the past, when 'gap investments' were popular, were 'stock-type houses' that aimed for 'market arbitrage' and 'capital gains', apartments in the era of renting are more like 'bond-type houses' that emphasize 'cash flow'.

like interest on a bond, the 'rental yield' - the amount of rent you receive each month - is the key determinant of an apartment's value.

now, you need to keep an eye out for 'apartments with good rent yields'. compare the 'rent transaction volume' and 'rent amount' of the complex you're interested in and its neighbors in the portal's real estate app. Even at the same price, the one with a higher rent yield will have an advantage in the long run.

places with abundant rental demand, such as 'double station area' and 'large new apartments' located in 'business districts', will become more valuable in the future. Even if I live in it initially, I need to have the wisdom to choose a 'rent-convertible apartment' that I can easily turn into a rental later.

conclusion

the age of renting is inevitable, and it's making the value of your home more important than ever. for renters, it's a sad fact of life, but for those preparing for retirement, an apartment can be a solid 'financial instrument'.

what are your smart ways to survive in this 'age of renting'? feel free to share in the comments. (And if you found the content helpful, please subscribe and like it!)

frequently asked questions (FAQs)

Q: Will subletting ever really go away completely? A : It's more likely that it will stay alive, especially in high-end homes and for certain niches. however, it will be hard to stop the mainstream of the market from 'renting to renting' - the shrinking of buy-to-let lending and the decline in gap investments are accelerating this process.

Q: Won't the introduction of super-long mortgages cause house prices to skyrocket again? A : There is a concern that it could stimulate demand and push house prices up. however, this is a policy instrument to help real buyers who are tired of paying rent to 'buy their own home'. A strategy is needed to minimize market shocks by applying safeguards such as DSR (debt-to-income ratio) regulation, along with supply policies such as 'equity sales'.

Q: is gap investment completely dead in the era of renting? A: Gap investment in areas with low 'rental yields' and high 'subletting rates' may be at great risk. The 'end of renting' weakens the foundation of gap investment. future investments are likely to be reorganized around 'cash flow' (rental yield) rather than market appreciation (capital gains).

Q: How do I calculate the rental yield of an apartment and where can I find it? A : The rental yield (per year) can be calculated simply as (rent X 12 months) / (sale price - deposit) X 100. you can calculate the approximate yield yourself by looking up actual transacted rent data for each apartment complex on real estate information platforms such as Naver Real Estate or Hogangno.