The prices for “jeonse” apartments in Seoul and nearby areas are surging with some units’ jeonse-to-apartment-price ratios exceeding 90 percent, real estate analysts said Sunday.

Jeonse is a unique system under which tenants furnish a hefty deposit that the landlord is free to invest and return at the end of the lease, typically after two years.

These deposits have been generally equivalent to about a half or third of the value of the leased property. However, the average rental-to-purchase ratio for apartments has surged as more and more owners are turning to monthly rent due to low interest rates.

“As jeonse supply falls far behind demand, a growing number of tenants are signing high-priced contracts even though they know the price is almost same as that of the house,” a real estate agency official said.

For instance, a contract was signed last month for a 59-square-meter unit at Jongam SK Apartment, located in Seongbuk-gu, Seoul, for 240 million won ($217,000) in jeonse deposit last month though its actual value was 249 million won, according to data from Seoul Property Information.

The average jeonse-to-purchase-price ratio for the apartment complex was 96.4 percent in February, compared to an average ratio of 73.4 percent in the Seongbuk area in northern Seoul in January, the data showed.

Jeonse deposits for some apartments in Gyeonggi Province have even exceeded apartment prices.

Despite the jeonse price hike, the lump-sum rental system remains the preferred housing arrangement for many Koreans as they consider monthly rent to be a higher financial burden.

The average ratio of jeonse to apartment prices nationwide stood at 70.2 percent in January this year, the highest level since 1998, according to KB Kookmin Bank. The ratio was 52.3 percent in February 2009, but has been gradually on the rise since then.

By Park Han-na (hnpark@heraldcorp.com)