Jeonse Is Giving Way to Monthly Rent — Use the Conversion Rate to See Which Costs Less

From January to September, Seoul logged 87,740 monthly-rent apartment deals. Buying is hard and jeonse listings are shrinking, so more renters are moving to monthly rent. Jeonse deposits also rose another 0.11% nationwide in the third week of October.

House hunting, you'll sometimes see the same home listed two ways: '300 million won jeonse' or '50 million won deposit plus 1 million won a month.' It's hard to tell at a glance which is cheaper. The number to use is the jeonse-to-monthly-rent conversion rate.

The conversion rate is the interest rate on switching to rent

From the landlord's side, they return part of the jeonse deposit and collect monthly rent instead. The conversion rate shows what annual interest that returned money is effectively earning.

In this case you put down 250 million won less, and in exchange you pay 4.8% a year on that amount as rent.

Compare it with your own interest rate

Now look at how you'd come up with that 250 million won.

In most cases the conversion rate is higher than loan or deposit rates, so on paper jeonse comes out cheaper. Monthly rent keeps growing anyway because jeonse listings are scarce, loan limits get in the way, and more people worry about not getting their deposit back.

What the numbers don't show

There's also a legal cap when switching from jeonse to monthly rent during an existing lease: the rate can't exceed the lower of the base rate plus 2 percentage points or 10% a year. With the base rate at 3.0%, the cap is currently 5.0%. This only applies to conversions mid-lease; new contracts follow market rates.