The Faster Monthly Rent Conversion of Jeonse

Apartment Lease Contracts with Monthly Rent This Year Account for 36.5%

Interest Rate Hikes Increase Interest Burden, Leading to Voluntary Preference for Monthly Rent

[Asia Economy Reporter Kim Min-young] The phenomenon of "Jeonse turning into monthly rent," where the proportion of Jeonse (key money deposit lease) decreases and monthly rent increases in the rental market, is rapidly progressing.

According to the Seoul Real Estate Information Plaza, from January 1 to February 22 this year, the proportion of apartment lease contracts with monthly rent in Seoul was 36.5%, up from 34.75% during the same period last year. Considering that the reporting deadline has not yet passed, the actual proportion of monthly rent contracts is likely even higher. Before the implementation of the three lease laws, the monthly rent proportion during the same period in 2019 (January 1 to February 22) was 29.28%, and in 2020 it was 29.14%.

Lease contracts are classified into Jeonse, monthly rent, semi-monthly rent, and semi-Jeonse. Monthly rent refers to lease transactions where the deposit is less than or equal to 12 months' worth of monthly rent; semi-monthly rent refers to transactions where the deposit is between 12 and 240 months' worth of monthly rent; and semi-Jeonse refers to transactions where the deposit exceeds 240 months' worth of monthly rent.

The sustained strength of monthly rent in the recent rental market is attributed to the lease laws, tightened loan regulations, and interest rate hikes. Jeonse prices rose due to the lease laws, but it became difficult to secure deposits because of loan restrictions, causing more tenants to shift to monthly rent. Additionally, with the increased burden of loan interest due to interest rate hikes, some tenants voluntarily chose monthly rent, judging it to be less burdensome.

Experts predict that the monthly rent trend will likely continue and strengthen for the time being, though it may not signify the "end of Jeonse." When the official property prices are announced in March, homeowners facing increased property tax burdens are expected to raise prices and offer more properties for monthly rent. Furthermore, additional interest rate hikes remain possible due to tightening measures originating from the U.S.

Ham Young-jin, Head of the Big Data Lab at Zigbang, said, "Unless supply issues are resolved, the phenomenon of Jeonse turning into monthly rent is expected to continue," adding, "As a result, the difficulties faced by tenants who cannot afford the increased monthly rent may also grow."

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