A 600 Million Won Jeonse Apartment Could Cost Up to 3 Million Won More Annually If Converted to Monthly Rent

[Financial News] A study found that converting a 100 million won jeonse deposit into monthly rent increases a tenant's annual housing-cost burden by approximately 1 million won.
An analysis commissioned by Kang Dae-sik, a People Power Party lawmaker on the Land, Infrastructure and Transport Committee of the National Assembly, and conducted by the National Assembly Research Service (NARS) found on the 24th that converting a 100 million won deposit into monthly rent would increase a tenant's annual expenses by 999,600 won.
The analysis focused on a 600 million won jeonse apartment. NARS assumed that the apartment would be converted to monthly rent with deposits of 500 million, 400 million, and 300 million won, respectively. It calculated the resulting changes in tenant costs by applying a jeonse-to-monthly-rent conversion rate of 4.5% and including the interest income earned by placing the returned deposit in a 3.5% time deposit.
The larger the amount converted, the greater the financial burden. Converting 100 million won added 83,300 won per month, while converting 200 million won added 1.94 million won annually and converting 300 million won added 3 million won annually. NARS stated, "As jeonse shifts to monthly rent, tenants move to a structure in which they must pay rent every month, which could lead to a real decline in income and delays in building assets."
Separate from the burden caused by converting jeonse to monthly rent, the share of monthly rentals itself is also growing rapidly. Data obtained by Kang's office from the Ministry of Land, Infrastructure and Transport (MOLIT) showed that monthly rentals accounted for 52.4% of apartment leases nationwide from January through July this year, exceeding half. The figure reached 80.4% for non-apartment housing nationwide.

Meanwhile, monthly rents themselves are also rising. According to the Korea Real Estate Board's (KREB) August national housing price trend survey, the average monthly rent for homes in Seoul was 1.313 million won last month, exceeding 1.3 million won for the first time since records began. For Seoul apartments alone, the average monthly rent rose to 1.641 million won.


[email protected] Han Seung-gon Reporter