In Seoul's rental market, more tenants are opting to increase their deposits and stay in their current homes rather than move to new ones. In August, six out of ten rental agreements were renewals, and among the agreements that did not utilize the renewal request right, 36.9% saw deposits rise by more than 5%. This trend reflects a 'lock-in effect' as rising rental prices and a shortage of available properties limit mobility during the fall moving season.
According to an analysis by Aju Economy of the Ministry of Land, Infrastructure and Transport's real transaction disclosure system, of the 7,460 rental agreements in Seoul last August, 4,461 were renewals, accounting for 59.8%, while 2,999 were new contracts (40.2%).
In August 2024, two years prior, there were 11,657 total agreements, with 8,043 new contracts and 3,614 renewals. Over the two years, new contracts decreased by 62.7%, while renewals increased by 23.4%. The share of renewals in total contracts jumped from 31.0% to 59.8%.
Notably, in August, agreements that did not use the renewal request right accounted for 30.3% of total rental contracts, with 2,259 such agreements. Among the 2,208 contracts where deposits could be compared, the median increase was 5%. Of these, 815 contracts (36.9%) saw deposits rise by more than 5%, and 562 contracts (25.5%) experienced increases of over 10%. This means that one in four agreements involved tenants accepting double-digit increases to remain in their current homes.
Under current law, exercising the renewal request right limits rent increases to 5%. However, landlords can negotiate higher increases through separate agreements. A survey conducted by the Seoul Metropolitan Government in May among 308 real estate agents in Seoul and the surrounding area found that 69.8% cited the inability to reapply for the renewal request right as the primary reason for the increase in agreements without it.
This trend continued into September. From September 1 to 15, of the 3,292 rental agreements, 1,937 were renewals, making up 58.8%. Agreements without the renewal request right totaled 944 (28.7%), and among the 919 contracts where deposits could be compared, 40.3% saw increases over 5%, while 28.0% experienced increases over 10%. However, the September figures are preliminary as the reporting deadline has not yet passed.
Regionally, among districts with over 50 comparable agreements in August, Seongbuk District had the highest median deposit increase at 10.6%. Following were Songpa District at 8.0%, Yeongdeungpo District at 7.8%, and Yangcheon District at 7.5%. In Seongbuk, 40 out of 58 agreements (69.0%) saw increases over 5%, and 32 agreements (55.2%) had increases over 10%.
As available properties decrease and moving costs rise, the number of rental listings in Seoul as of September 29 stands at 19,853, a 16.7% decrease from a year ago. The average rental price for apartments in Seoul in August was 636.628 million won, an increase of 82.682 million won (14.9%) compared to two years ago, with the median rental price rising from 480 million won to 560 million won.
In a situation where tenants need to prepare additional deposits in the millions to move to similar homes, those who have already exhausted their renewal rights are choosing to increase their deposits and stay put. Analysts suggest that the rise in renewals reflects not only housing stability but also the constraints on mobility due to rising rental prices and a lack of available properties.
Kim In-man, head of Kim In-man Real Estate Economic Research Institute, stated, “The decrease in new housing supply in Seoul, combined with the shortage of available properties, has led to rising rental prices even in relatively affordable areas. There is a need to increase supply in both public and private rental markets, as well as non-apartment housing.”
* This article has been translated by AI.
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