[10·26 Debt Measures] Buying Momentum Likely to Decrease Further Amid Rising Fatigue

Impact on the Real Estate Market

Financial Services Commission Chairman Ko Seung-beom is announcing measures to strengthen household debt management on the 26th at the Government Seoul Office in Jongno-gu, Seoul. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kim Min-young] The real estate market, already sluggish due to fatigue from soaring housing prices, is expected to freeze further following the government's additional household debt management measures announced on the 26th. However, concerns are also emerging that these measures could raise the barrier for low-income and low-credit individuals to own homes, thereby stimulating the jeonse and monthly rent markets and potentially causing a vicious cycle of rising housing prices in the long term.

Ham Young-jin, Head of the Zigbang Big Data Lab, said, "With financial institutions also reducing loan limits under the household debt management plan, combined with interest rate hikes, real estate purchasing sentiment will be constrained," adding, "Coupled with accumulated fatigue from rising housing prices, the buying momentum is likely to decrease." Yoon Ji-hae, Senior Researcher at Real Estate R114, also predicted, "If the available loan amount decreases, there will be an effect of demand withdrawal. However, since even one-homeowners are restricted from trading up, transactions will stall and prices will stagnate."

According to the Seoul Real Estate Information Plaza, as of the previous day, the number of apartment transactions reported in Seoul this month was 744, down 71% from 2,633 last month. Although the transaction volume itself may increase due to the 30-day reporting deadline after contract signing, the downward trend is clear. Buying sentiment is also noticeably subdued. The Seoul Apartment Sales Supply-Demand Index announced by the Korea Real Estate Board was 106.6 as of the 18th, down 0.3 points from 101.9 the previous week. It has been declining for six consecutive weeks. Although it still exceeds the baseline of 100, if this trend continues, the market is likely to shift to a seller's disadvantage soon.

However, experts say it remains uncertain whether the transaction slowdown will lead to a drop in housing prices. This is because while loan execution has become difficult, suppressing speculative buying, the actual demand waiting to purchase has not been resolved. Researcher Yoon explained, "Although mortgage loans were completely banned for homes priced over 1.5 billion KRW, transactions only decreased afterward, but prices did not fall." According to KB Kookmin Bank's monthly housing price trend time series statistics, the average apartment sale price in Seoul in October steadily rose to 1,216.39 million KRW.

Some express concerns that if the total debt service ratio (DSR) for secondary financial institutions is lowered by 10 percentage points, low-credit and low-income real demanders may be pushed into the jeonse and monthly rent markets. Park Won-gap, Senior Real Estate Specialist at KB Kookmin Bank, said, "Due to DSR regulations, real demanders with insufficient financial capacity will inevitably be affected," warning that if they remain in the rental market, a vicious cycle of rising jeonse and monthly rent prices, as well as sale prices, could repeat.

Ko Jong-wan, Director of the Korea Asset Management Corporation, said, "When people who cannot buy homes turn to jeonse, it causes jeonse prices to rise," adding, "Eventually, rising jeonse prices will again push up housing prices."

With jeonse prices soaring, the required funds have increased while loan limits have decreased, raising the possibility of more "monthly rent refugees" seeking monthly rent instead of jeonse. Ham Young-jin of Zigbang Big Data Lab said, "As sales demand decreases, some demand shifts to rentals, putting pressure on the jeonse market. However, with jeonse loan regulations also in place, those restricted from jeonse loans may choose deposit-based monthly rent, causing a monthly rent shift phenomenon," expressing concern, "If landlords' demands for increased jeonse deposits cannot be easily met, tenants may have no choice but to reluctantly opt for deposit-based monthly rent."