Real Estate R114 "Higher Proportion of Monthly Rent in Newly Built Apartments... More Severe in the Seoul Metropolitan Area"

Share of Monthly Rent Transactions for 'Newly Built' Homes Under 5 Years Occupancy at 48%... Above Average
Over 53.7% in the Seoul Metropolitan Area
"High Jeonse Prices and Tax Pass-Through Effects... Will Accelerate Further When Lease Renewal Expirations Increase"

[Asia Economy Reporter Kim Hyemin] An analysis has revealed that newly built apartments less than five years old have a higher proportion of monthly rent. This trend of jeonse (long-term deposit lease) shifting to monthly rent was more pronounced in the Seoul metropolitan area. It is pointed out that this is the result of high jeonse prices combined with the impact of tax pass-through, and it is expected that this phenomenon will accelerate further when lease renewal properties in August are released to the market at prices reflecting four years' worth of price increases in advance.

On the 15th, Real Estate R114 analyzed actual transaction data from the Ministry of Land, Infrastructure and Transport and found that from January to May this year, the number of apartment lease transactions nationwide was 383,859. Among these, jeonse transactions accounted for 234,354 (61.1%), and monthly rent transactions were 149,505 (38.9%), with jeonse transactions being more common. However, the proportion of jeonse transactions tended to decrease the newer the apartment.

The proportion of monthly rent for apartments was ▲48.1% for those less than five years old ▲39.2% for those between six and ten years old ▲35.2% for those over ten years old. This means that the monthly rent proportion for newly built apartments is about 10 percentage points higher than the average. This was especially noticeable in the densely populated Seoul metropolitan area with high rental demand. For newly built apartments in the metropolitan area, the monthly rent proportion was 53.7% (28,582 cases), exceeding the jeonse proportion (46.3%).

Senior Researcher Yeo Kyung-hee of Real Estate R114 said, "From the demand side, it seems that relatively high jeonse prices compared to older apartments had an impact," adding, "After the new lease law was implemented, landlords initially set high jeonse prices, and combined with the increased interest burden due to rising loan interest rates, more tenants chose quasi-jeonse contracts." Quasi-jeonse refers to lease transactions where the deposit exceeds two years' worth of monthly rent.

In fact, during the same period, the proportion of quasi-jeonse transactions was ▲41.5% for apartments less than five years old ▲29.2% for those between six and ten years old ▲25% for those over ten years old, showing a higher proportion for newer apartments. The quasi-jeonse proportion for newly built apartments in the metropolitan area was 47.8%, significantly higher than the average of 36.1%.

Senior Researcher Yeo said, "The increase in monthly rent supply due to landlords trying to pass on the sharply rising property tax burden to tenants is also a major cause of the high proportion of monthly rent transactions."

The number of monthly rent transactions in the form of quasi-jeonse apartments may increase further. Starting this August, newly contracted properties with lease renewals expiring will be sequentially released into the lease market, and there is a possibility that prices will be raised further by reflecting four years' worth of price increases in advance, either matching surrounding market prices or including renewal contracts. Senior Researcher Yeo forecasted, "As tenants who want to pay part of the deposit as monthly rent and landlords who prefer monthly rent to pass on property taxes align their needs, the shift to monthly rent will accelerate, especially in the Seoul metropolitan area and newly built apartments with high residential preference."

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