With Tightened Loan Restrictions... Gangnam Small Apartment Cutoff Drops by 10 Points

Ban on Mortgage Loans for High-End Homes Over 1.5 Billion Won
Investment Sentiment Freezes Amid 12·16 High-Intensity Measures

Gaepo Presidences Xi Minimum Winning Score 56 Points
13 Points Lower Than Last Year's Le El Sinbanpo Central

‘1 Billion Won Profit Lotto’ Tied Up by Loan Regulations
Strengthened Investigation of Purchase Fund Sources Also Plays a Role

Average Cutoff Maintained Except for Some Small Units
‘Playground for Cash-Rich’ Controversy Likely to Continue

[Asia Economy Reporter Choi Dong-hyun] The government's stringent loan regulations have lowered the winning cutoff scores for apartments in Seoul's Gangnam area by nearly 10 points. This is attributed to the comprehensive ban on mortgage loans for high-priced homes over 1.5 billion KRW under the December 16 real estate measures last year, along with significantly strengthened investigations into the sources of home purchase funds, which have dampened investment sentiment.

According to the Korea Financial Telecommunications & Clearings Institute on the 13th, the lowest winning score for the 'Gaepo Presidents Xi' apartments in Gaepo-dong, Gangnam-gu, Seoul, whose winners were announced that day, was 56 points. Both the 45㎡ and 49㎡ units recorded this lowest score. This apartment complex was the first to announce a resident recruitment notice and accept applications in a prime Gangnam location after the government’s policy announcement at the end of last year. It is a reconstruction of the Gaepo Jugong 4 complex, offering 232 households ranging from 39 to 114㎡ (excluding special supply units), with applications received earlier this month. The cutoff scores announced that day are 8 to 13 points lower compared to the 'Le El Shinbanpo Central' in Jamwon-dong, Seocho-gu, which was sold in November last year before the government measures with a cutoff of 69 points, and 'Le El Daechi' in Daechi-dong, Gangnam-gu, with 64 points. It is even lower than the 59 points of Hoban Summit Songpa in Wirye New Town, which has a relatively less favorable location.

Gaepo Presidents Xi has attracted attention as an apartment in a prime Gangnam area, where price differences of over 1 billion KRW are expected considering the surrounding market prices. Despite this, the industry points to loan regulations as the reason for the lowered winning cutoff scores. Apartments priced over 900 million KRW are already ineligible for group interim payment loans, and if the market price exceeds 1.5 billion KRW at the time of move-in, mortgage loans can be completely prohibited. The average sale price per 3.3㎡ of this apartment is 47.5 million KRW. Except for 31 units of 39㎡, all units exceed 900 million KRW in sale price, making interim payment loans impossible. Medium to large apartments of 84㎡ or more already exceed 1.5 billion KRW in sale price alone. For example, the 'Raemian Blestige' 84㎡ unit, which moved in nearby in February last year, currently has a market price ranging from 2.5 to 2.8 billion KRW.

Strengthened investigations into the sources of home purchase funds are also cited as a factor impacting the market as much as loan regulations. The government expanded the scope of homes requiring submission of funding plans and significantly intensified verification processes through the December 16 measures, greatly dampening investor sentiment. An industry insider said, "Even wealthy individuals who can afford to purchase high-priced homes without loans cannot help but react sensitively to 'source of funds investigations.'"

Although cutoff scores for some small apartments have decreased, the overall average cutoff score has not significantly dropped, indicating that the enthusiasm for 'lottery-like' subscription remains strong. The average cutoff score for all units in Gaepo Presidents Xi was 63.9 points, not much different from Le El Shinbanpo Central (69 points) and Le El Daechi (65.8 points). The highest winning score was 79 points, achieved in two unit types by applicants. Winners with 79 points were found in the 59㎡B and 114㎡B units, scores close to the perfect score (84 points), which requires over 15 years of no home ownership (32 points), six or more dependents (35 points), and over 15 years of subscription to the housing subscription savings account (17 points). Apart from five of the 14 unit types, high-scoring winners with scores in the 70s appeared in both small/medium and medium/large units.

Experts assess that demand for new apartments in the Gangnam area remains solid. With the private land price ceiling exemption ending at the end of April, the gap between sale prices and market prices is likely to widen. Additionally, with reconstruction and redevelopment in prime areas of Seoul and the metropolitan area shrinking and new supply decreasing, the value of new apartments is expected to rise further. There is growing concern that as competition decreases, the new apartment market in Gangnam could become a 'playground for the wealthy' targeting some affluent buyers. Ham Young-jin, head of the Zigbang Big Data Lab, said, "It is true that winning scores have somewhat decreased, but this appears to be a temporary pause caused by government loan regulations, market transaction crackdowns, and the transfer of subscription work. Demand for home purchases in the subscription market remains high, and competition is expected to intensify before the implementation of the price ceiling system."