Seoul Rental Contracts: Monthly Rent Surpasses Jeonse for the First Time in Over 8 Years

First Monthly Rent > Jeonse Since January 1, 2014
Renters Face Increased Jeonse Loan Burden Due to Interest Rate Hikes
Jeonse Prices Decline Amid Quick Sale-Dominated Transactions

[Asia Economy Reporter Hwang Seoyul] The proportion of monthly rent in housing lease contracts traded in Seoul has surpassed the jeonse (lump-sum deposit lease) for the first time in over eight years. This change is influenced by the fact that, due to interest rate hikes, it has become more advantageous to live on monthly rent rather than paying interest on a jeonse deposit. Many landlords are raising the jeonse prices and converting the increase into monthly rent. In the jeonse market, transactions are mainly conducted through quick sales, causing jeonse prices in Seoul to show a downward trend.

According to the confirmed date lease transaction data from the Korea Court Registry Information Plaza on the 11th, last month the number of monthly rent transactions was 39,494, exceeding the 35,757 jeonse transactions. This is the first time since the confirmed date assignment process was computerized on January 1, 2014. The confirmed date refers to the date stamped on the contract by the court or community service center to certify the date the housing lease contract was signed.

Real estate agents met on site unanimously said that as the burden of jeonse loan repayments increased due to interest rate hikes, more tenants are seeking monthly rent properties. In many cases, the monthly interest payments on loans that tenants must repay have become more expensive than the cost of switching to monthly rent. According to the Financial Supervisory Service, some jeonse loan products from commercial banks have a maximum interest rate of up to 5.25% per month. The jeonse-to-monthly rent conversion rate for apartment complexes in Seoul is 4.7% (as of December last year). In other words, tenants facing interest rates higher than 4.7% find it more advantageous to pay monthly rent than to take out loans.

From the landlord’s perspective, since raising the jeonse price does not lead to transactions, they convert the increase into monthly rent. Yoon Jihae, senior researcher at Real Estate R114, explained, "For new contracts not subject to the rent ceiling system, it is common to convert the increase in jeonse deposits partially into monthly rent, accelerating the shift from jeonse to monthly rent."

Because there is less tenant demand compared to the number of listings, transactions are mainly conducted through quick sales with lowered jeonse asking prices, causing Seoul apartment jeonse prices to decline. According to the Korea Real Estate Board, Seoul apartment jeonse prices fell for the second consecutive week last week (-0.03%). For example, a unit in Gil-eum New Town 9 Complex Raemian (exclusive area 59.92㎡) in Gil-eum-dong, Seongbuk-gu, was traded for 450 million KRW this month. This is 50 million KRW lower than a similar floor unit that was traded for 500 million KRW in September 2020.

Of course, this phenomenon varies somewhat by region within Seoul. Among the 25 autonomous districts, 16 had more monthly rent transactions than jeonse last month. Although this is an increase compared to 12 districts last month and 6 districts in the same month last year, there are still areas where jeonse is more common. A representative from real estate office A in Gil-eum-dong, Seongbuk-gu, said, "Last year, 4 out of 10 lease contracts were jeonse, but now it has decreased to about 3 out of 10."

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