Nine out of 10 jeonse renewal contracts for Seoul apartments signed in July without invoking the tenant's statutory renewal right came with a higher deposit, with the average increase reaching 46.83 million won.
Renewals Cluster Even Without the Rent Cap
Of the 4,576 jeonse renewal contracts for Seoul apartments in July, 2,093 were signed without the tenant exercising the renewal right, the Ministry of Land, Infrastructure and Transport said on the 6th. That accounts for 45.7% of all renewals.
The average deposit on those contracts was 559.04 million won, up 46.83 million won, or 9.1%, from an average of 512.21 million won two years earlier. The burden was heavier than for contracts where the renewal right was used, which carried an average increase of 27.44 million won.
Under the tenant's statutory renewal right, a tenant who requests renewal can extend the lease by two years with any rent increase capped at 5%. When a tenant forgoes that right and signs a new contract by agreement with the landlord, the cap does not apply.
Among the 2,093 renewals signed without the renewal right, 1,835 came with a higher deposit, or 87.7% of the total. Deposits were left unchanged in 234 contracts, or 11.2%, and lowered in 24, or 1.1%.
By district, Jongno-gu recorded the largest average increase at 122.03 million won, followed by Gwangjin-gu at 83.93 million won, Gangnam-gu at 80.69 million won, Yongsan-gu at 80.15 million won, Songpa-gu at 77.71 million won and Seongdong-gu at 76.95 million won.
Some deposits jumped by hundreds of millions of won. An 84-square-meter unit at Kkumeuisup I'Park in Seongbuk-gu was renewed in July at 825 million won, up 300 million won from 525 million won two years earlier. A 114-square-meter unit at Raemian Leaders One in Seocho-gu was renewed at 2.35 billion won, a 370 million won increase over two years.
Jeonse Listings Fall 12% as Shift to Monthly Rent Accelerates
The surge in deposits is being linked to the designation of the entire city of Seoul as a land transaction permit zone last year.
Buyers of apartments in such zones face a residency requirement for a set period, making it difficult to put a newly purchased unit up for jeonse right away. The measure was intended to curb purchase demand and stabilize sale prices, but it has also had the side effect of shrinking the supply of jeonse listings.
Data from property analytics firm Asil showed 20,387 jeonse listings for Seoul apartments as of the 3rd of this month, down 2,876, or 12.4%, from 23,263 at the end of last year.
Jeonse prices have climbed as well. Seoul apartment jeonse prices rose 7.59% last month from December of last year, more than double the national average gain of 3.58%, according to KB Real Estate.
A shift from jeonse toward monthly rent is also emerging. In July, 366 renewals converted pure jeonse contracts into arrangements that include monthly rent, and in 248 of those the deposit was left unchanged with monthly rent simply added. A tenant of an 84-square-meter unit at Seocho Raemian in Seocho-gu signed a jeonse contract with a 1 billion won deposit two years ago, then renewed in July keeping the same deposit while adding 600,000 won in monthly rent.
With demand concentrated in the autumn moving season and little prospect of jeonse listings increasing in the short term, price gains and the shift toward monthly rent in Seoul's jeonse market may continue for some time, some observers say.
