Jeonse Decreases, Monthly Rent Increases

On the 7th, as the number of jeonse listings decreased due to the revision of the Lease Protection Act and other factors, the rise in jeonse prices in Seoul continued. This is a view of the city center from Lotte World Tower Seoul Sky in Songpa-gu. Photo by Moon Honam munonam@

[Asia Economy Reporter Yuri Kim] It has been revealed that the conversion from jeonse (long-term deposit lease) to monthly rent is becoming prominent, especially in small apartments, following the initial implementation of the lease renewal request system and the rent ceiling system. The industry expects that while jeonse will not disappear from the market, the shift to monthly rent will accelerate rapidly.

According to Apartment Actual Transaction Prices (Asil) on the 8th, the number of jeonse listings in Seoul was 13,515, a 69.2% decrease compared to 43,791 listings two months ago. During this period, jeonse listings sharply declined in most Gangnam and Gangbuk areas, including Songpa-gu (-86.6%), Eunpyeong-gu (-84.7%), Yangcheon-gu (-83.6%), and Jungnang-gu (-81.2%).

On the other hand, the proportion of banjeonse (semi-jeonse) contracts increased. According to the Seoul Real Estate Information Plaza on the 8th, among the total jeonse and monthly rent contracts (7,830) in Seoul last month, the proportion of banjeonse (1,054 contracts) was 13.46%, up from 10.15% in July and 9.89% in June (as of September 7). Banjeonse refers to contracts where the deposit exceeds the equivalent of 240 months of monthly rent. Monthly rent transactions increased mainly in small-sized apartments. According to Real Estate 114, as of the 24th of last month, the proportion of monthly rent transactions for small apartments under 60㎡ (exclusive area) in Seoul reached 59.6% up to July this year, approaching 60%. The monthly rent proportion for this size was 47.8% in 2016, less than half, but steadily increased to 50.1% in 2017, 52.0% in 2018, and 54.0% last year.

The industry expects this shift to monthly rent centered on small-sized apartments to accelerate. From the landlord’s perspective, the burden of returning the deposit is lower, and tenants also face relatively less monthly rent burden. Kyunghee Yeo, Senior Researcher at Real Estate 114, said, "Although the monthly rent for small apartments is lower than for medium and large apartments, the monthly rent burden relative to the area is high. Given the low-interest-rate environment, the conversion from jeonse to monthly rent is expected to continue, and supplementary measures for new monthly rent contract holders will likely be necessary."

Meanwhile, jeonse prices generally showed an upward trend. According to Zigbang, a 107㎡ (exclusive area) apartment in Samik Green 2nd Complex, Myeongil-dong, Gangdong-gu, was leased for 650 million KRW in July but was contracted for 895 million KRW in August, rising about 245 million KRW in just one month. Similarly, a 131㎡ apartment in Woosung, Jamsil-dong, Songpa-gu, increased from 750 million KRW to 980 million KRW, a rise of 230 million KRW. A 114㎡ apartment in Byeoksan, Geumho-dong 1-ga, Seongdong-gu, was also traded at a price about 220 million KRW higher within a month. Jeonse prices also rose in Geumgwan-gu (Geumcheon, Gwanak, Guro districts) and Nodogang (Nowon, Dobong, Gangbuk districts), where mid- to low-priced apartments are concentrated. An 84㎡ apartment in Gwanak Park Prugio, Bongcheon-dong, Gwanak-gu, was traded at a maximum of 600 million KRW in August, up from 450 million KRW in July. The jeonse price for an 84㎡ apartment in Beacon Dream Hill 3, Sanggye-dong, Nowon-gu, also rose from 350 million KRW to 500 million KRW, an increase of 150 million KRW.

This content was produced with the assistance of AI translation services.