Low interest rates prompt switch from deposit-based rentals in South Korea
Traditional leasing system going out of fashion as landlords seek higher returns, shifting more money into circulation and helping to lift economy
For a country trying to avoid the menace of deflation, South Korea is receiving timely help from unusual quarters - landlords and their tenants.
Interest rates at historic lows have wrought a change in traditional rental contracts that could gradually unleash billions of dollars for more productive uses such as consumption and home-buying.
Landlords have for decades operated the jeonse rental system, whereby tenants pay a deposit that can be more than half the home's value instead of having to pay a monthly rent.
There is a huge pool of funds being underused. Nomura estimates that US$400 billion was tied up in jeonse deposits in 2012, equal to a third of the country's annual economic output.
But the jeonse system appears to be going out of fashion, as most landlords cannot make high enough returns from stashing the money in bank deposits paying just 2.5 per cent - they will go down again after the central bank lowered its policy rate last week.
Using the funds as leverage to further invest in the real estate market holds little attraction for landlords either. Prices have been flat.