Expectations for Increased Transactions Under 900 Million KRW in No·Do·Gang
But No Effect Yet on Site
Only Some Mid-to-Low Priced Apartments Likely to Be Absorbed
[Asia Economy Reporter Minyoung Kim] As applications for the Special BoGeumjari Loan, which allows loans up to 500 million KRW, have officially begun, market attention is focused on whether transactions of mid-to-low priced houses under 900 million KRW will revive. However, since market interest rates have peaked and are now declining, there are also forecasts that the purchase incentive effect induced by the Special BoGeumjari Loan will not be significant.
According to financial authorities on the 1st, on the first day of application for the Special BoGeumjari Loan, a fixed-rate mortgage loan with a minimum annual interest rate of 3.25%, on the 30th of last month, customers flocked, causing the Korea Housing Finance Corporation application (app) to crash. On that day, not only the Housing Finance Corporation app but also the online homepage experienced access delays, and offline channels such as SC First Bank counters saw continuous visits related to the Special BoGeumjari Loan.
The Special BoGeumjari Loan allows loans up to 500 million KRW without applying the Debt Service Ratio (DSR) for houses priced at 900 million KRW or less, regardless of income limits. It is a policy financial product that offers fixed interest rates in the 4% range with a maximum loan term of up to 50 years.
Industry insiders view the success of the Special BoGeumjari Loan as a signal of recovery in housing purchase demand. Since the trend of interest rate hikes has sharply dampened buying demand, lowering the interest burden is expected to encourage buyers with sufficient income capacity to make purchases.
In particular, it is anticipated that the launch of this product will help revive transactions of mid-to-low priced houses under 900 million KRW in Seoul. According to Real Estate R114, the average apartment prices in 12 districts including Gwangjin-gu, Dongdaemun-gu, Jungnang-gu, Seongbuk-gu, Dobong-gu, Nowon-gu, Eunpyeong-gu, Gangseo-gu, Guro-gu, Geumcheon-gu, and Gwanak-gu in Seoul are around 900 million KRW.
Yoon Jihae, Senior Researcher at Real Estate R114, said, "From the perspective of buyers who must decide between purchasing or renting, if their income level is good, there is sufficient room to turn to buying," adding, "Especially, I expect an increase in transaction volume for mid-to-low priced houses under 900 million KRW."
However, on the ground, the effect of the Special BoGeumjari Loan is still difficult to confirm. A representative from real estate agency A in Sanggye-dong, Nowon-gu, Seoul, said, "Since there is a high demand for refinancing existing loans at lower interest rates, the impact on purchases is not significant," and added, "There has been no particular increase in purchase inquiries due to the launch of the Special BoGeumjari Loan."
There is also a view that the Special BoGeumjari Loan will find it difficult to reverse the downward trend in the real estate market atmosphere. This is because the interest rate difference between the Special BoGeumjari Loan and recent mortgage products from commercial banks is not large, and the situations such as economic recession and housing market deterioration have not changed significantly.
Park Wongap, Senior Specialist at KB Real Estate, said, "Some of the severely discounted mid-to-low priced apartments will be absorbed," but added, "However, since buyer sentiment is subdued, a reversal to an upward trend will be difficult."
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