Expansion of Loan Limits for Homeless Buyers
Seoul Low-Priced Apartment Demand Surges
Homeowners Raising Asking Prices... Listing Properties Around 600 Million Won
[Asia Economy Reporter Kim Hyemin] Since this month, the expanded loan limits for non-homeowners have led to a series of ‘6 billion won price matching’ among mid-to-low priced apartments. Apartment prices that were hovering in the low 500 million won range earlier this year are now all approaching 600 million won. There are concerns that the expanded loan limits intended to help low-income households are instead fueling price increases in mid-to-low priced apartments.
According to the Ministry of Land, Infrastructure and Transport’s real transaction price disclosure system on the 20th, a 49.77㎡ (exclusive area) unit in Sinnae Daemyeong 11 Complex, Sinnae-dong, Jungnang-gu, Seoul, changed hands for 580 million won on the 7th. This is a 60 million won increase in just one month from the 520 million won transaction on the 2nd of last month.
Built in 1996, this complex did not exceed 500 million won earlier this year. However, the expanded loan limits have driven demand for mid-to-low priced apartments, stimulating housing prices, according to frontline real estate agents. A representative from nearby A Real Estate Agency said, "Homeowners are initially asking for prices higher than the actual transaction prices," adding, "Since the loan limits increased this month, many listings are being priced to match 600 million won."
The 600 million won price point is the limit for the representative policy financial product called the ‘Bogeumjari Loan’. If the price exceeds 600 million won, borrowers cannot benefit from the favorable interest rates or loan limits of the Bogeumjari Loan. The government has raised the loan limit this month while maintaining the baseline. If the housing price and income criteria are met, the loan amount has increased from the previous 300 million won to 360 million won.
Apartments priced below 600 million won are also exempt from the Debt Service Ratio (DSR) regulations. From this month, the government has restricted the annual principal and interest repayment amount to not exceed 40% of annual income, but this applies only to homes priced over 600 million won (in regulated areas). This means that while loan limits have expanded, these properties are relatively free from regulations.
The market points out that such policies have caused the prices of low-priced apartments on the outskirts of Seoul to suddenly approach the 600 million won mark. For example, the sale price of a 59.96㎡ unit in Gyeongnam 2nd Complex, Gocheok-dong, Guro-gu, was around 530 million won in January this year but rose to 590 million won on the 7th of this month. Similarly, 84.9㎡ units in Heerak, Sanggye-dong, Nowon-gu sold for 599 million won, and 84.72㎡ units in Samsung, Seokgwan-dong, Seongbuk-gu traded at 598 million won, indicating that price matching at 600 million won is closely related to this trend.
The problem is that although the loan limit increased by 60 million won, housing prices have risen by the same amount, increasing the burden on low-income households trying to buy their own homes. A representative from B Real Estate Agency in Seongbuk-gu said, "Because listings are scarce, buyers tend to raise their offers and rush to buy before prices exceed 600 million won."
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