 Monthly rent with variable deposit: A new form of rental contract in KoreaChang-Moo Lee and Eui-Chul Chung Journal of Housing Economics, 2010, vol. 19, issue 4, 315-323 Abstract: In this paper, we describe the structure of the monthly-rent-with-variable-deposit (MRVD) contract, a distinct type of rental contract in Korea. We demonstrate that the Chonsei contract is one variant of the MRVD contract. To explain the MRVD contract, we propose a leverage-effect-seeking hypothesis. Based on this hypothesis, we are able to elucidate a variety of rental market conditions in Korea. Our hypothesis is consistent with the simultaneous existence of several types of rental contracts and various combinations of monthly rent, as well as the up-front deposit in the MRVD contracts. We also focused on the deposit-to-monthly-rent conversion rate, a critical factor in the Korean rental housing market. Our hypothesis indicates that conversion rates vary across local markets depending on local market conditions, such as the expected house price appreciation rate. The results of our data analysis demonstrate that our hypothesis more adequately explains the observed trend in the conversion rate, as well as that in the MRVD contracts. Keywords: Monthly-rent-with-variable-deposit; Leverage-effect-seeking; hypothesis; Deposit-to-monthly-rent; conversion; rate; Korea (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:19:y:2010:i:4:p:315-323 Access Statistics for this article Journal of Housing Economics is currently edited by H. O. Pollakowski More articles in Journal of Housing Economics from Elsevier |
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