Seoul Jeonse Prices Rise... Jeonse Renewal Rate Increases by 10%P in One Year

Seoul Apartment Jeonse Prices Rise for 51 Consecutive Weeks, from 25.7% in April Last Year to 36% This April
6 out of 10 Lease Renewals Include Increase... Average Rise of 48.79 Million KRW

The proportion of apartment lease renewal contracts in Seoul has increased by more than 10 percentage points over the past year. This means that the number of households renewing their existing lease contracts has risen due to the impact of rising lease prices. It was also found that in 6 out of 10 renewal contracts last month, the lease deposit increased. Experts predict that the proportion of lease renewals will gradually rise as lease listings and new apartment supply decrease, leading to further increases in lease prices.

[Image source=Yonhap News]

Lease Price Increase Delays Moving to New Rental Homes

On the 17th, Real Estate R114 analyzed actual transaction data from the Ministry of Land, Infrastructure and Transport and found that the number of apartment lease renewal contracts in Seoul last month was 2,942, accounting for about 36% of the total lease contracts (8,162). The renewal contract ratio has exceeded 30% since the beginning of this year. It increased from 30.7% in January to 37.9% in February, then recorded 33.7% in March. Compared to the same period last year, it increased by more than 10 percentage points at its highest. Last year, the ratio stayed in the 20% range with 29.4% in January, 28.2% in February, 25.4% in March, and 25.7% in April.

The rising lease prices seem to encourage the renewal of existing lease contracts. When lease prices rise, tenants tend to reduce their housing costs. Instead of looking for new rental homes, they renew their existing lease contracts. According to the Korea Real Estate Board, the apartment lease prices in Seoul rose by 0.09% in the first week of this month compared to the previous week, marking 51 consecutive weeks of increase since the fourth week of May last year.

Ji-yeon Kim, lead researcher of the Real Estate R114 research team, explained, "Over the past year, as lease prices in Seoul have risen, cases of raising lease deposits to match the increased market prices have increased. Tenants are choosing to renew their existing leases instead of signing new contracts due to the higher lease prices."

Increase in Lease Deposit Renewal and Decrease in Reduction Renewals

The proportion of lease renewals with increased deposits has risen sharply over the past year. Last month, 58% (1,710 out of 2,942) of Seoul apartment renewal contracts involved increased deposits, up 17 percentage points from April last year (41%, 1,456 out of 3,568). This indicates that more cases extended the lease period while raising the lease deposit compared to before. This figure rose from 54% in January to 58% in February and has remained at 58% since. An analysis of the 1,710 increased deposit renewals last month showed that the average lease deposit increased by 48.79 million KRW.

On the other hand, the proportion of lease renewals with reduced deposits decreased. It dropped 19 percentage points from 44% (1,567 out of 3,568) in April last year to 25% (733 out of 2,942) in April this year. Looking only at this year, it decreased from 33% in January to 28% in February and 26% in March. The average reduction amount also decreased from 116.06 million KRW in April last year to 78.26 million KRW in April this year, a decrease of 37.8 million KRW. The proportion of lease deposit freezes remained similar, around 15% to 17% during the same period.

Experts expect this trend to continue for some time due to the sharp decline in new supply in Seoul. According to Asil, a real estate big data company, as of the previous day, the number of apartment lease listings in Seoul was 29,187, a 24% decrease compared to one year ago (38,804). Compared to the beginning of the year (34,822), it also decreased by 15.5%. Researcher Kim said, "As existing tenants extend their leases, not only has the supply of new lease listings in the market decreased, but the supply of new apartments in Seoul has also declined, so the upward trend in lease prices is expected to continue for a considerable period."