Nationwide Officetel Monthly Rent-to-Jeonse Conversion Rate at 5% Range... Highest Since October 2020

February Nationwide Officetel Monthly Rent Conversion Rate 5.02%
Landlords Earn More from Monthly Rent Conversion than Interest Rates
Tenants Face Increased Jeonse Burden Due to Jeonse Loan Regulations and Interest Rate Hikes

Trends in Monthly Rent to Jeonse Conversion Rate for Officetels Nationwide / Data = Korea Real Estate Board

[Asia Economy Reporter Hwang Seoyul] The nationwide officetel jeonse-to-monthly rent conversion rate in February reached its highest level since October 2020.

According to the Korea Real Estate Board on the 27th, the nationwide officetel jeonse-to-monthly rent conversion rate in February recorded 5.02%. This is the highest since October 2020 (5.11%). The jeonse-to-monthly rent conversion rate refers to a fixed ratio applied when converting a jeonse contract to a monthly rent contract. A higher conversion rate means that the monthly rent is higher compared to the jeonse price. By region, the metropolitan area remained steady at 4.93% compared to January, while the provinces rose by 0.02 percentage points to 5.70%.

By area, Seoul recorded 4.74%, the highest since March last year (4.73%). Daejeon reached 5.85%, the highest since May last year (5.86%), while Busan (5.55%) and Sejong (6.17%) also showed their highest levels since June and October 2020, respectively. On the other hand, Incheon (5.03%), Gyeonggi (5.14%), Daegu (6.08%), and Gwangju (5.57%) fell by 0.03% to 0.08% compared to the previous month.

Industry insiders say that the difference in the jeonse-to-monthly rent conversion rate is the result of landlords and tenants' preferences for monthly rent and semi-monthly rent. Landlords earn more income from monthly or semi-monthly rent than from interest income, while tenants face increased burdens on jeonse deposits due to tightened jeonse loan regulations.

Furthermore, the interest rate hikes have reinforced the 'monthly rent-ification' of jeonse. As the Bank of Korea gradually raised the base interest rate to 0.75%, 1%, and 1.25%, the interest rates on jeonse loans also increased. According to the Financial Supervisory Service on the 22nd, the variable interest rates on jeonse loans from the four major domestic banks ranged from 3.25% to 4.92% per annum. This means tenants have to bear a greater burden than before when securing jeonse funds.

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