Seoul Apartment Jeonse Ratio Hits Highest in 2 Years 4 Months... "Jeonse Prices Remain Strong"

Last month, the proportion of jeonse (long-term lease) transactions in Seoul apartment rentals reached its highest level in 2 years and 4 months. This indicates an increased demand for jeonse over monthly rent, and the market expects the recent upward trend in jeonse prices to continue for the time being.

View of downtown apartments from Namsan, Seoul. / Photo by Yonhap News

According to the Seoul Real Estate Information Plaza on the 9th, out of 14,022 apartment rental transactions in Seoul last month (based on reports as of the 8th), 8,707 were jeonse transactions, accounting for 62.1% of the total. This is the highest proportion since May 2021, when jeonse accounted for 67.2%, marking a 2-year and 4-month peak.

The proportion of jeonse in Seoul apartments reached 68.9% in August 2020, but after the implementation of the two lease laws, jeonse prices surged, gradually increasing the share of monthly rent (monthly rent with deposit). Especially last year, due to rising interest on jeonse loans following interest rate hikes and the impact of jeonse fraud, the jeonse proportion in Seoul apartments dropped to 47.6% as of December.

However, as jeonse prices fell significantly until early this year, demand from monthly renters switching to jeonse has increased. Interest rates on jeonse loans from commercial banks also dropped from a peak of around 6% annually in the second half of last year to 3-4% recently, leading to more tenants taking out loans to secure new jeonse contracts. The jeonse-to-monthly rent conversion rate (the rate applied when converting jeonse deposits to monthly rent) approaching 5%, which is higher than bank interest rates, is also considered to have influenced the rise in jeonse demand.

With this trend continuing, jeonse prices rose more than monthly rents in the third quarter compared to the first half of the year.

According to a comparison by Real Estate R114 of the prices of newly contracted Seoul apartments (within the same complex and housing type) in the third quarter and the first half of this year, the average jeonse price increased by 6.7%, from 483.52 million KRW in the first half to 515.98 million KRW in the third quarter. In contrast, monthly rent, when converted to deposit equivalent, rose by only 2.8%, from 491.18 million KRW in the first half to 550.7 million KRW in the third quarter. The increase was less than half that of jeonse.

Experts expect the strong trend in jeonse prices to continue as demand grows. According to Asil, a real estate big data company, the number of jeonse listings for Seoul apartments decreased by 1.9%, from 31,511 a month ago to 30,915 as of the 8th of this month. This indicates that demand exceeds supply.

Yeogyeonghee, Senior Researcher at Real Estate R114, said, "The upward trend in jeonse prices may ease somewhat until the winter vacation moving demand picks up, but the overall strong trend is expected to continue. Next year, the volume of new housing supply will significantly decrease, and with reductions in permits and construction starts, prices could be influenced to rise over the next 2 to 3 years."

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