New Apartment Leases in Seoul Cost 80 Million Won More Than Renewals

The gap between new and renewed apartment lease prices in the Seoul metropolitan area is widening, with new contracts becoming substantially more expensive than renewals for identical units. This trend is particularly pronounced in Seoul, where the difference in deposit for a 59-square-meter apartment grew from 35 million won in January to 77.5 million won by June.

For 84-square-meter units in Seoul, the gap expanded from 43.75 million won in January to 80 million won in June. New leases for these larger units saw their prices climb from 656.25 million won to 700 million won, while renewals only increased from 612.5 million won to 620 million won. Similar, though less extreme, widening gaps were observed in Gyeonggi Province.

Several factors contribute to this disparity. New leases immediately incorporate the latest market prices, which have been rising rapidly. In contrast, renewals are constrained by existing contract terms and legal limits on rent increases, such as the Contract Renewal Rights. This creates a situation where long-term tenants benefit from lower rates, while new tenants face significantly higher costs.

Furthermore, the overall shortage of available apartments and escalating rental prices are pushing more tenants towards renewals. In Seoul, the proportion of new leases dropped from 52.6% in January to 45.0% in June, while renewals increased to over 55.0%. Gyeonggi Province also saw renewals rise from 38.6% to 45.4% during the same period. This shift suggests that tenants are opting to stay in their current homes due to the increased financial burden and associated costs of moving.

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While general renewals not using the contract renewal option can reflect current market prices more significantly, they can still show a difference in deposit levels compared to new contracts based on the existing agreement. With the recent shortage of rental properties and rising prices, the burden of deposits for new contracts has increased, and considering additional costs like moving expenses and brokerage fees, it appears that existing tenants are increasingly choosing to renew their leases.