Expansion of Semi-Jeonse Apartment Transactions in Seoul... Increase in People Switching from Jeonse

9,376 Cases from May to July This Year... 5% Increase Compared to Last Year
Jeonse Decreased from 33,000 to 29,000 Cases
Junjeonse Prices Rising... Contrast with Declines in Jeonse, Wolse, and Junwolse

[Asia Economy Reporter Kim Hyemin] Mr. A, who was preparing to move to Gangnam-gu, Seoul due to work and his children's education, recently signed a quasi-jeonse contract with a deposit of 400 million KRW and a monthly rent of 1.5 million KRW. He considered taking out a loan to secure a jeonse, but since interest rates had already risen significantly, even calculating interest at around 4%, the monthly expenses were not much different. Mr. A said, "I feel like I'm throwing money away on the ground with monthly rent, and people around me advised against it, but there weren't many options," adding, "There is a wider variety of monthly rent options, and considering the interest rate recalculation, it was not a bad choice."

Among rental transactions in Seoul, quasi-jeonse apartment deals are increasing. This means that many tenants are paying multi-hundred-million-won deposits plus monthly rents ranging from tens of thousands to over one million KRW. Meanwhile, jeonse is steadily declining, indicating a trend of 'jeonse turning into monthly rent,' especially with more tenants moving into the quasi-jeonse market.

According to the Seoul Real Estate Information Plaza on the 24th, the number of quasi-jeonse apartment transactions in Seoul from May to July this year totaled 9,376, about 5% higher than the same period last year (8,926). In contrast, jeonse transactions decreased by 12.6%, from 33,469 to 29,245.

The trend is even clearer when looking at July alone. Quasi-jeonse transactions in July totaled 3,020, and although the reporting period is one month and the data may be incomplete, this is an increase from 2,745 in the same period last year. Meanwhile, jeonse transactions dropped from 11,009 to 9,392. Among all monthly rent transactions, only quasi-jeonse apartments showed an increase in transaction volume.

Rental transactions involving monthly rent are classified based on the size of the deposit and the proportion of monthly rent into monthly rent (less than 12 months), semi-monthly rent (12 to 240 months), and quasi-jeonse (over 240 months). For example, if the monthly rent is 1 million KRW, a deposit exceeding 240 million KRW classifies the transaction as quasi-jeonse. This type of quasi-jeonse transaction was particularly prominent in the three Gangnam districts (Gangnam-gu, Seocho-gu, Songpa-gu). As of July, quasi-jeonse transactions in the Gangnam 3 districts accounted for 736 cases, representing 24% of the total.

The increase in quasi-jeonse transactions is also affecting prices. According to the monthly housing price trends by the Korea Real Estate Board, the only category with a rising rent price index in Seoul in July was quasi-jeonse. The comprehensive housing quasi-jeonse price index changed from -0.02% in June to 0.04% in July, turning positive. In contrast, the Seoul apartment jeonse price index fell further from -0.04% to -0.11% during the same period, and monthly rent and semi-monthly rent also maintained negative growth rates.

The rise in quasi-jeonse transactions is largely attributed to the sharp increase in jeonse loan interest rates following the base interest rate hikes, which has increased the burden of loan interest to a level comparable to monthly rent. While jeonse loan interest rates have soared to 5%, the conversion rate from jeonse to monthly rent, according to a Seoul city survey, averaged 3.9% for apartments in the second quarter of this year. This means it is cheaper to convert the rising deposit into monthly rent payments rather than covering the deposit with a loan and paying monthly interest. Landlords also naturally welcome this as it reduces their property tax burden.

This phenomenon can also be interpreted as jeonse demand shifting to quasi-jeonse. Seoul apartment jeonse transactions maintained around 10,000 until May but dropped to the 9,000 range in June. This contrasts with the increasing trend during the same period last year. June also coincides with the period when households whose jeonse contract renewal rights expired seek new contracts. Ultimately, it can be understood that those who lived under jeonse added some monthly rent on top of their existing deposit to find quasi-jeonse housing. Cha Sangwook, CEO of Four Commas, said, "The rise in interest rates has made jeonse loan interest payments higher than monthly rent conversion fees, leading to jeonse avoidance and preference for monthly rent," adding, "From the tenant's perspective, this is a rational move toward lower housing costs."

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