The side effects of the 3rd lease law are already in full swing?… Seoul’s new jeonse deposit, 150 million won higher than before renewal
At the end of May, it will be one year since the monthly rent reporting system was introduced. As a result, it was found that among the apartment contracts in Seoul reported from June last year to March of this year, tenants who signed a new jeonse contract paid an average of 150 million won more in deposit than those who signed a renewal contract (right to apply for contract renewal). This is a phenomenon that occurred as double and triple prices were created in the jeonse market after the three rental laws were introduced at the end of July 2020, the renewal right, the upper limit for cheonsei, and the cheonsei report system last year.
As a result of analysis by Real Estate R114 of 183,103 Seoul apartment cheonsei contracts reported from June 1 of last year to the end of March of this year (as of May 3), 49,528 of the total number of cheonsei transactions reported as renewal contracts it was a thing Among them, there were 33,731 cases where rent was limited to 5% or less using renewal rights, accounting for 68.1% of the total.
The proportion of using the renewal right was significantly higher for jeonse than for monthly rent. Among the 37,824 cases of renewing lease contracts, 27,468 cases of renewal rights were used, accounting for 72.6%. However, out of 11,070 monthly rent renewal contracts, 6263 cases (53.5%) used the renewal right, which was 19.1 percentage points higher than the monthly rent. Real Estate R114 Senior Researcher Yeo Kyung-hee said, “The use of renewal rights seems to be high in jeonse contracts, which require a larger deposit than monthly rent, as the price of jeonset has soared after the enforcement of the 2nd Lease Act, including renewal rights.”
Among the jeonse transactions (excluding monthly rent) within the survey period, there was at least one case of a jeonse contract between the same housing type, for a total of 16,664 cases. Among them, the average deposit for new contracts was 673.21 million won, and the average deposit for renewal contracts was 518.61 million won, showing an average difference of 154.61 million won in deposits for new and renewal contracts.
This means that new contractors who signed a cheonsei rental contract within the period paid an average of 150 million won more than the renewal contractors. On the other hand, the tenants who used the renewal right were able to live for two more years for about 150 million won lower than those who got the new jeonse.
On the other hand, the gap between the renewal contract and the new contract deposit was more pronounced in mid-to-large high-priced apartments in the Gangnam area. In the case of 161.47㎡ for Dongbu Centerville, Daechi-dong, Gangnam-gu, the average deposit for renewal contracts during this period was KRW 2.1 billion, while the average deposit for new contracts was KRW 3.8 billion. With a gap of 1.7 billion won, the deposit for renewal contracts was 55.3%, slightly more than half of the average deposit for new contracts.
Based on reported cases, the 112.93 m² dedicated to Acro River Park in Banpo-dong, Seocho-gu was 1.732.5 billion won in renewal contract deposits in November last year, and the average new deposit was 3.08 billion won, a difference of 1.345.7 million won. On the other hand, the 59.92㎡ dedicated to the Dream Forest Kolon Haneulchae in Jangwi-dong, Seongbuk-gu had an average of 418.21 million won in renewal contract deposits and 462.5 million won in new contract deposits, with a gap of less than 50 million won. The average deposit for renewal contracts for this housing type was 90.4% of the deposit for new contracts. In the case of 39.7㎡ for exclusive use of Eunbit 1 complex in Sanggye-dong, Nowon-gu, the average deposit for renewal contracts was 158.33 million won, and for new contracts, 192 million won, showing a gap of 33.67 million won.
Experts are concerned that from the end of July this year, two years after the introduction of the right to renew the contract, new contract items for which the renewal right will be released will increase the tenant’s deposit and rent burden. This is because, although the increase rate is limited to 5% when the renewal right is applied, the price of a new contract can be raised to the market price level. In particular, the rent burden is expected to be much higher compared to the jeonse price two years ago as the price of jeonse has risen sharply after the contract renewal application right and the upper limit for cheonsei were implemented at the end of July 2020.
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