In six out of 10 renewal contracts for Seoul apartment jeonse and monthly rentals, tenants did not use the right to request a contract renewal and instead reached a "negotiated renewal" with landlords to set new terms. The number of tenants who had already used the right and had no way to stay in their current homes except by negotiating a renewal has increased, and some with the right remaining are holding on to it in case the jeonse and monthly rent market becomes more unstable. In some re-renewal contracts, monthly rent nearly doubled.
According to the Ministry of Land, Infrastructure and Transport's actual transaction disclosure system on the 8th, of the 13,411 jeonse and monthly rental contracts for Seoul apartments reported in August, 6,956 were renewals, accounting for 51.9%.
This is the first time this year that renewals have accounted for more than half of all jeonse and monthly rental contracts. By month, the share of renewals was 44.2% in January, 45.9% in February, 45.2% in March, 41.8% in April, 45.9% in May, 44.6% in June, and 46.6% in July, remaining in the 40% range.
By contrast, the usage rate of the right to request a contract renewal fell to its lowest of the year. In August, contracts using the right numbered 2,724, or 39.2% of all renewals. That is 0.7 percentage points lower than the previous low of 39.9% in March. Cases where tenants extended contracts by negotiating with landlords without using the right numbered 4,232, accounting for 60.8% of all renewals.
The right to request a contract renewal allows a tenant to demand a one-time two-year extension. When the right is exercised, rent increases are in principle capped at 5%.
Experts say the rise in negotiated renewals largely reflects an increase in tenants who have already used the right. Kim Deok-rye, head of housing research at the Korea Housing Institute, said, "Since the introduction of the right to request a contract renewal, we are now in the second renewal cycle, and those who have already used the right are at the point of deciding whether to move," adding, "When jeonse and monthly rent conditions are as difficult as now, more people may choose to extend by negotiating with landlords instead of moving."
There were also cases in which monthly rent jumped in re-renewals where the right had already been exhausted. For the 84-square-meter exclusive unit at Helio City in Songpa District, after using the right in September 2024, the contract was renewed again on the 13th of last month. The deposit stayed at 500 million won, but the monthly rent rose 95.8% from 1.66 million won to 3.25 million won.
For the 133-square-meter exclusive unit at Lotte Castle First in Gangdong District, after extending the contract in September 2024 by using the right with a deposit of 300 million won and monthly rent of 1.75 million won, it was renewed again on the 13th of last month. The deposit was maintained, but the monthly rent rose to 3.3 million won, up 88.6%. If the previous rent was below the neighborhood rate, for tenants it may be more advantageous to accept the higher monthly rent and stay rather than pay brokerage fees and moving costs to find another home.
There were also cases where, although the right appeared to remain, tenants chose a negotiated renewal. For the 84.81-square-meter exclusive unit at Sillim 2nd Prugio in Gwanak District, after signing a new contract in August 2024 with a deposit of 50 million won and monthly rent of 1.25 million won, it was renewed last month by keeping the deposit and raising the monthly rent 5.6% to 1.32 million won. It was reported that the right was not used. If the rent increase is manageable, this suggests a choice to reserve the right for use if the lease market becomes more unstable.
The government's Aug. 3 real estate tax reform plan is also cited as a factor that could increase negotiated renewals going forward. If the burden of holding high-priced or non-residential dwellings grows, landlords may sell rental homes or move in themselves, further reducing jeonse and monthly rental listings.
Nam Hyuk-woo of the Woori Bank Real Estate Research Institute said, "Policy and tax changes are reducing existing jeonse and monthly rental supply while new move-in volumes are also decreasing, leading to a compound shortage of listings," adding, "Landlords who continue to hold dwellings may switch jeonse to deposit-backed monthly rent to secure cash for paying holding taxes, or raise monthly rent in place of deposits."