Jeonse Deposit Reduction Renewal, Average 100 Million Won Drop Compared to 2 Years Ago

More than 40% of the renewed jeonse contracts for apartments in the Seoul metropolitan area this month involved a reduction in the deposit. The renewed deposit amount decreased by about 100 million KRW compared to the previous contract.

A panoramic view of the apartment complex as seen from Namsan, Seoul.
[Photo by Yonhap News]

On the 24th, Real Estate R114 analyzed actual transaction data from the Ministry of Land, Infrastructure and Transport and found that 4,004 renewed jeonse contracts for apartments in the Seoul metropolitan area this month were estimated to be renewals of previous jeonse contracts. Among these, 1,713 cases (42.8%) were renewals with reduced deposits. The monthly proportion of deposit reductions has been in double digits since November last year and has maintained the 40% range since March this year.

On the other hand, the proportion of renewed contracts with increased deposits in May was 39.3% (1,572 cases), significantly lower than in July and August last year. The fact that some increase contracts occurred amid the recent weakening of jeonse prices can be attributed to rental properties by landlords with deposits lower than market prices due to the maximum 5% rent increase limit.

Examining the deposits of 16,275 renewed jeonse contracts with reduced deposits in the Seoul metropolitan area from January to May this year, the average renewed deposit was 447.55 million KRW, which is 94.11 million KRW lower than the previous 541.66 million KRW. By region, the reduction was largest in Seoul at 118.03 million KRW (697.86 million KRW → 579.83 million KRW), followed by Gyeonggi at 80.27 million KRW (457.46 million KRW → 377.19 million KRW), and Incheon at 70.45 million KRW (349.92 million KRW → 279.47 million KRW).

Among the reduced deposit renewals, 69.4% (11,301 out of 16,275 cases) involved a deposit reduction of less than 100 million KRW, but in some large-sized apartments in areas such as Gangnam in Seoul, Bundang in Gyeonggi, and Hanam, deposits were reduced by more than 300 million KRW, increasing the overall reduction amount.

Despite the deposit reductions in renewed contracts, many cases still have deposits higher than those of new contracts. Among 7,271 cases from January to May this year where both a reduced renewal (limited to jeonse-to-jeonse) and a new contract were signed for the same complex and same size in the Seoul metropolitan area, 4,172 cases (57%) had new contract deposits (based on the highest price) lower than the renewed deposit. This trend of relatively higher deposits in renewed contracts is believed to be due to the considerable costs involved in moving, such as moving expenses, brokerage fees, and loan interest.

Ye Kyung-hee, Senior Researcher at Real Estate R114, stated, “As the decline in jeonse prices has slowed recently and some areas are showing signs of rebound, tenants in certain regions may increasingly face a dilemma between renewing and signing new contracts.”

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