http://koreatimes.co.kr/www/news/biz/2014/12/602_169330.html
Choi Seung-hyun, 39, signed a contract with a landlord for monthly rent in Seoul last week after completing his jeonse (deposit-based housing rental system) tenure this month.
"My landlord told me that he wants to turn jeonse into monthly rent if I want to renew the contract. I have no option because there are no houses where I want to live available for jeonse, and I cannot afford to pay soaring jeonse prices elsewhere," he said.
Jeonse, Korea's unique property rental system, is based on a lump sum deposit a tenant pays to a landlord at the start of a rental contract. Landlords return the deposit to tenants with no interest when the contract expires, typically after two years.
Jeonse is now being replaced more and more by the more Western system of monthly rent, as Choi found out.
"The landlord said I should pay 500,000 won monthly for the apartment, with 200 million won as a deposit," he said.
A growing number of people are paying monthly rent for homes instead of paying jeonse amid an uncertain outlook for housing prices.
According to Seoul City Real Estate Information, the number of monthly rent contracts amounted to 146,227 as of Dec. 1, already surpassing last year's record of 144,868. Meanwhile, the number of jeonse contracts is tallied at 241,011, down from the 253,262 a year ago.
However, real estate agents say some monthly rent contracts are not included in the statistics as some landlords don't report their monthly rent contracts to the authorities to avoid the income tax from housing rents. This means that given unreported contracts, the number of tenants paying monthly rents might surpass that of jeonse tenants.
A residential survey by the Ministry of Land, Infrastructure and Transport showed that the number of households for monthly rent nationwide reached 3.68 million last year, while the number of jeonse households amounted to 3.83 million, showing little gap between the two. This year, the number of households for monthly rents is expected to surpass that of the jeonse households.
"We cannot resist this trend shift from jeonse to monthly rents in this low interest rate and low-growth era. It is a matter of time and pace for the housing rental market to change from jeonse to monthly rents," Ham Young-jin, a research head of Real Estate 114, said.
She said that it is natural that more and more landlords prefer monthly rents over jeonse amid a decline in the deposit interest rates offered by banks.
Over the last five years, jeonse prices have continued to rise, which has put more burden on tenants. This year, the average jeonse price of Seoul's apartments had risen by 50 million won, she explained.
Ham said that next year's outlook is murkier for tenants as the supply of the apartments is expected to be reduced by 45 percent.
"Amid lingering uncertainties, tenants are finding it hard to get houses for jeonse, so they have to renew the current contracts even though they are shifted into monthly rent," she said.
"Now is a transitional period for the house rental market. Ultimately, monthly rent will replace the jeonse system," she said.