When a Korean landlord says “I’m converting to semi-jeonse at renewal”, most tenants simply accept — unsure whether they can refuse, or whether the figure they were quoted is fair.
1. What it's worth. Turning a ₩400 million jeonse into ₩200 million plus rent: the ₩200 million released, at the statutory ceiling of 4.75%, caps rent at ₩791,667 a month. At Seoul's market average of 4.25% it works out at ₩708,333 — a gap of ₩83,334 a month, about ₩1 million a year.
2. Where the risk is. The ceiling moved this month. The Bank of Korea raised the base rate from 2.50% to 2.75% on 16 July 2026, and the ceiling is the lower of “base rate + 2%” and 10% — so it went from 4.50% to 4.75%. The rate that applies is the one on the date the contract is signed.
3. What to do. Run the quoted terms back through the formula. Well above 4.25% means the offer is worse than the market average — that is where the negotiation starts. Note the ceiling governs renewals; a brand-new contract is a different case.
Below: what the conversion rate is, how the ceiling is set, and the order to negotiate in.
What the conversion rate is
It is the rate applied when turning a jeonse deposit into monthly rent. The Seoul city guide gives the formula:
“The jeonse-to-monthly conversion rate is the ratio applied when converting a jeonse deposit into monthly rent. It is calculated as (monthly rent / (jeonse deposit − new deposit)) × 100, and multiplied by 12 months to annualise.”
In plain terms: against the deposit you gave up, what percentage is a year of rent?
| Step | Calculation |
|---|---|
| 1. Deposit given up | Jeonse deposit − new monthly-rent deposit |
| 2. Monthly rate | Rent ÷ deposit given up × 100 |
| 3. Annual conversion rate | Monthly rate × 12 |
Seoul’s worked example: a ₩110m jeonse converted to a ₩80m deposit plus ₩200,000 a month gives “monthly rate = (200,000 / (110m − 80m)) × 100 = 0.66%”, which annualises to 7.92%.
That example is from a 2015 Seoul city page. The formula still holds, but the amounts and the 7.92% rate reflect that era’s market. Current Seoul levels are below.
Where Seoul stands now
From the Korea Association of Realtors’ publication, September 2025:
“Last month Seoul’s housing conversion rate recorded 4.25%. This is the highest in seven years, since February 2018.”
“The rate has risen for ten consecutive months from 4.10% last October.”
“The 14 northern districts recorded 4.31%… the 11 southern districts recorded 4.19%.”
Run your quoted terms through the formula. If the result sits well above 4.25%, the offer is worse than the market average — and that is where a negotiation starts.
Here is what a fraction of a point actually comes to, with Seoul's figures and the ceiling on one axis.
The statutory ceiling — and what changed this month
The Housing Lease Protection Act caps the conversion rate. The structure commonly cited is the lower of “Bank of Korea base rate + 2%” and 10%. In August 2026 we checked that formula against the statute (below). Neither 10% nor 2% appears in the Act.
That base rate rose this month. From the Bank of Korea’s monetary policy decision of 16 July 2026:
“The Monetary Policy Board decided to raise the Base Rate from its current 2.50% to 2.75% until the next monetary policy decision.”
| Period | Bank of Korea base rate |
|---|---|
| Through 15 July 2026 | 2.50% |
| From 16 July 2026 | 2.75% |
Resolved August 2026: the “base rate + 2%” formula is confirmed from Article 7-2(2) of the Act plus Article 9(2) of its Enforcement Decree (see the section below). What follows is the note we kept before that. Previously we could not verify the “base rate + 2%” formula against the statute itself — the government legislation site is unreachable from here. What we have is a realtors’ association page stating “from 1 November 2020 it changed to base rate + 2.0%”, and the body of that same page still carries the pre-amendment figure (+3.5%), so it is not safe to quote directly. Confirm before signing.
One more line from that association material: “the Bank of Korea base rate applicable is the rate as at the contract signing date.” So when you sign determines which rate applies. If your contract straddles mid-July, check this.
Neither 10% nor 2% appears in the Act
Follow the widely quoted “base rate + 2%” back to where it is written and it looks different. In Article 7-2 of the Housing Lease Protection Act and Article 9 of its Enforcement Decree, the Act carries no figures at all — both ratios sit in the Decree.
Article 7-2 (Restriction on the Rate for Conversion into Monthly Rent) Where all or part of a deposit is converted into monthly rent, it shall not exceed the monthly rent obtained by multiplying the converted amount by the lower of the following rates:
1. the rate prescribed by Presidential Decree, taking into account bank lending rates and local economic conditions;
2. the rate obtained by adding a rate prescribed by Presidential Decree to the base rate published by the Bank of Korea.
The Act contains no figures at all. It fixes only the structure — take the lower of two rates — and delegates both rates to the Decree.
The same pattern we met in the VAT article, where the widely quoted ₩104 million likewise did not appear in the Act.
The numbers live in Article 9 of the Decree, which is two lines long.
Article 9 (Rate for Conversion into Monthly Rent)
(1) “The rate prescribed by Presidential Decree” under Art. 7-2(1) means 10 per cent per annum (written in the text as il-hal, one tenth).
(2) “A rate prescribed by Presidential Decree” under Art. 7-2(2) means 2 per cent per annum. <amended 29 Nov. 2016, 29 Sept. 2020>
| What people say | What the text says | Where |
|---|---|---|
| 10% | “one tenth per annum” | Decree Art. 9(1) |
| base rate + 2% | “the base rate plus 2 per cent per annum” | Act Art. 7-2(2) + Decree Art. 9(2) |
| whichever is lower | “the lower of the following rates” | Act Art. 7-2, main text |
The practical consequence: both numbers can change without going through the National Assembly.
Paragraph 2 carries <amended 29 Nov. 2016, 29 Sept. 2020> — it has already moved twice. The realtors' association line about “from 1 November 2020 it changed to base rate + 2.0%” matches the enforcement date of that 2020 amendment, which also confirms where that sentence came from.
So an older notice quoting “+3.5%” should not be trusted. Check the current Decree before signing.
Applying the August 2026 figures (our calculation): 2.75% + 2% = 4.75% against 10%. The lower governs, so the ceiling is 4.75% — Seoul's 4.25% average sits under it.
The Act itself says “where converted”
Below, this article says the ceiling “is about renewals.” The basis is in the article's opening words — “where all or part of a deposit is converted into monthly rent.” It bites on converting an existing deposit; it is not a control on the market rate of a fresh monthly-rent contract.
Still unverified — whether rent taken above the ceiling can be recovered. Article 7-2 stops at “shall not exceed” and says nothing about the effect of an excess or a claim to recover it. The “excess is void” line in the table below belongs to the 5% rent-increase cap, and the two rules are separate.
This ceiling is about renewals
A common confusion. The conversion ceiling applies when converting the deposit of an existing lease into rent. It does not regulate the market price of a brand-new lease.
A related but separate rule: per Seoul city guidance, “even if the landlord and tenant agree at renewal to raise the rent by more than 5%, the portion exceeding 5% is void as contrary to the Housing Lease Protection Act, and the tenant may bring an unjust enrichment claim against the landlord for the excess.”
| Item | Conversion ceiling | 5% rent increase cap |
|---|---|---|
| What it limits | The rate of deposit-to-rent conversion | The increase in rent at renewal |
| Benchmark | Tied to the base rate (unverified) | 5% |
| If exceeded | Not verified | Excess is void; unjust enrichment claim available |
Whether rent charged above the conversion ceiling can be recovered is not something we could verify. The “void” language above concerns the 5% rent cap, a different rule. Do not merge the two.
And here is what “as at the contract date” is worth in money.
How to actually negotiate
- Put the offer through the formula — (rent ÷ deposit given up) × 100 × 12.
- Compare against 4.25% — or 4.31% in the north, 4.19% in the south.
- Check the statutory ceiling — the base rate moved on 16 July, so recalculate from your signing date.
- Check your renewal right — the window now closes two months before expiry. See the tenant protection law.
- Price the alternative — comparing jeonse loan interest against the rent makes the decision concrete. Use the loan calculator.
For the structure itself see the semi-jeonse guide, and for warning signs in a jeonse contract, jeonse fraud prevention. To run the maths quickly there is the conversion calculator.
Questions people ask
Can I refuse a conversion to semi-jeonse?
The association material, quoting the private rental housing provisions, says “the consent of the tenant must be obtained”. Whether that applies identically to ordinary residential leases could not be verified against the statute.
Why is northern Seoul higher than the south?
The article does not explain the cause, so neither do we. The figures themselves are north 4.31% > Seoul 4.25% > south 4.19%.
Are there district-level or property-type figures?
The source covers Seoul overall and the two halves only. District and property-type breakdowns were not verified.
Does Seoul still publish this quarterly?
The city’s conversion-rate board has not been updated since 2018, which is why the current figures here come from the association’s reporting.
What if the base rate changes again?
The ceiling moves with it. Check the Bank of Korea’s monetary policy release for the rate at your signing date.
Sources and where to check
- Korea Ministry of Government Legislation, National Law Information Centre — Housing Lease Protection Act, Article 7-2, in force 2 January 2026, Act No. 21065. Source for “the lower of the following rates,” for both rates being delegated to the Decree, and for the “where all or part of a deposit is converted” scope.
- National Law Information Centre — Enforcement Decree, Article 9, in force 1 July 2026. Source for “one tenth per annum,” “2 per cent per annum,” and the amendment history of 2016 and 2020 that matches the association's “from 1 November 2020” line.
- Bank of Korea — Monetary Policy Decision, 16 July 2026. Source of “from its current 2.50% to 2.75%”.
- Seoul Metropolitan Government — Seoul explains semi-jeonse pricing (2 November 2015). Source of the formula and the annualisation method. The example amounts date from 2015.
- Seoul Metropolitan Government — The revised Housing Lease Protection Act and the 5% cap (21 October 2020). Source of the “excess is void…unjust enrichment claim” language, which concerns the rent increase cap, not the conversion ceiling.
- Korea Association of Realtors publication — Seoul conversion rate hits a seven-year high (4 September 2025). Source of 4.25% · 4.31% · 4.19% · 4.10%.
- Korea Association of Realtors — limits on conversion rates for private rental housing. Source of “consent of the tenant” and “rate as at the contract signing date”. The body of that page still carries the pre-amendment +3.5% figure, so the formula itself is not asserted here.
Written as of July 2026. The formula, the Seoul conversion rates, the 2.75% base rate and the effect of the 5% rent cap all come from the sources above, and the base rate was read twice with matching results. Updated August 2026: the statutory text behind “base rate + 2%” is now confirmed — Act Art. 7-2 and Decree Art. 9, where neither figure appears in the Act itself. Three things remain unverified: (2) whether rent above the conversion ceiling can be recovered; (3) district-level and property-type figures; and (4) whether the tenant-consent requirement applies identically to ordinary residential leases. Confirm with a licensed agent or the Korea Legal Aid Corporation (132) before signing. This is not legal advice.
