New Apartments in the Seoul Metropolitan Area: Tenants Choose Monthly Rent Over Jeonse Due to Deposit Burden

Within 5 Years of Completion, 60% of Apartment Lease Transactions in the Seoul Metropolitan Area Are 'Monthly Rent'
The Newer the Apartment, the Higher the Proportion of Semi-Monthly and Semi-Jeonse Transactions

Newly built apartments in the metropolitan area that are less than five years old show more active jeonse and monthly rent transactions compared to older apartments. This is because they offer superior residential convenience, making them highly preferred by actual users, and because jeonse and monthly rent listings are concentrated around the move-in period, increasing transactions. Meanwhile, newly built apartments tend to have a higher deposit burden compared to older ones, leading to more transactions where part of the deposit is converted into monthly rent rather than full jeonse. As jeonse prices rise, the jeonse prices of newly built apartments have increased relatively more, so the proportion of monthly rent is expected to rise further.

On the 4th, Real Estate R114 compared the proportion of jeonse and monthly rent transactions by building age segment for metropolitan area apartments in 2023 using actual transaction data from the Ministry of Land, Infrastructure and Transport. Apartments less than five years old accounted for the highest proportion at 29.3% (216,282 out of 739,156 transactions). Real Estate R114 stated, "Considering that apartments less than five years old make up 15.6% of the metropolitan area housing stock (939,184 out of 6,024,786 households), the transaction proportion is quite high," adding, "Rental transactions are more active in newly built apartments compared to both recently built and older apartments."

In 2023, the proportion of jeonse transactions among metropolitan area apartments was lowest in apartments less than five years old at 42.8% (92,639 out of 216,282 transactions), while it was highest in older apartments aged 21 to 30 years at 68.3% (120,705 out of 176,621 transactions). Notably, the jeonse transaction proportion for apartments less than five years old steadily declined from 47.3% in Q1 to 42.7% in Q2, 41.8% in Q3, and 37.5% in Q4. Real Estate R114 commented, "As jeonse prices for newly built apartments recovered rapidly, demand choosing monthly rent increased."

As of the end of 2023, the average jeonse price per household for metropolitan area apartments by building age segment was '5 years or less: 528.09 million KRW,' '6 to 10 years: 536.33 million KRW,' and 'over 10 years: 417.98 million KRW.' There is a price gap of over 100 million KRW between apartments less than five years old and those over ten years old. Consequently, newly built apartments have a relatively higher proportion of quasi-monthly rent and quasi-jeonse transactions, where part of the deposit is converted into monthly rent, compared to older apartments. Among jeonse and monthly rent transactions for metropolitan area apartments less than five years old last year, the proportions of quasi-monthly rent and quasi-jeonse were 30.6% and 24.6%, respectively, higher than those for apartments over ten years old.

Real Estate R114 stated, "Due to a decrease in new move-in supply, increased jeonse and monthly rent demand amid concerns over further house price declines, and demand shifting from non-apartment housing, the upward trend in metropolitan area jeonse prices is expected to continue in 2024." Demand for converting part of the deposit into monthly rent instead of full jeonse may increase due to rising price burdens. This trend is expected to be more pronounced in newly built apartments and smaller units favored by younger people with lower income and asset levels.

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