Significant Help for Buyers of Households Priced Between 900 Million and 1.2 Billion Won
Market Impact Limited Due to Interest Rate Hikes and DSR Regulations
[Asia Economy Reporter Cha Wanyong] From the 21st, the allowable prepayment loan price for apartments will be expanded from the previous 900 million KRW or less to 1.2 billion KRW or less. Since there are a considerable number of households with pre-sale prices between 900 million and 1.2 billion KRW among the complexes about to be sold, this is expected to be a great help to buyers.
According to the Ministry of Land, Infrastructure and Transport and the Housing and Urban Guarantee Corporation (HUG) on the 20th, from the 21st, apartments with pre-sale prices of 1.2 billion KRW or less will also be eligible for prepayment loans. Until now, prepayment loans were completely prohibited for apartments with pre-sale prices exceeding 900 million KRW, regardless of whether they were in regulated or non-regulated areas.
HUG plans to revise its internal regulations to provide prepayment loan guarantees for apartments priced at 1.2 billion KRW or less, starting with complexes applying for prepayment loans. Projects that have already started prepayment can also apply for loan guarantees for the remaining prepayment installments. The prepayment loan is made by the project entity obtaining a guarantee from HUG or the Korea Housing Finance Corporation (HF), borrowing the prepayment from financial institutions, and then supporting the contract holders.
The place expected to benefit the most from the eased prepayment benefits is Dunchon Jugong Apartment in Gangdong-gu, Seoul. The pre-sale price for the exclusive 59㎡ units in this complex ranges from 940 million to 960 million KRW, covering 2,725 households.
Other complexes about to be sold, such as Jangwi Xi Radiant, Hillstate e-Pyeonhansesang Munjeong, Riverside SK VIEW Lotte Castle, Yeongdeungpo Xi Dignity, Hillstate DMC Station, Dunchon The Sharp Park Soleil Yu, and Cheolsan Xi The Heritage, are also expected to benefit from the eased prepayment conditions.
However, the market expects the effect of the regulatory easing to be limited due to ongoing interest rate hikes and the remaining Debt Service Ratio (DSR) regulations. As of the 17th, the variable interest rates on mortgage loans from the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?range from 5.27% to 7.17% annually, which is more than 0.5 percentage points higher on both ends compared to 4.75% to 6.58% on the 24th of last month.
DSR regulations remain in place. On the 10th, the government announced at the real estate-related ministers' meeting that even if various loan regulations are eased, the DSR regulation will be maintained as is. DSR is the ratio of the borrower's income to the principal and interest payments to be repaid. Since July, the third stage of DSR regulation has been applied, which limits the annual principal and interest repayment amount to not exceed 40% of annual income (50% for secondary financial institutions) if the borrower's total loan amount is 100 million KRW or more. Both prepayment and final payment loans are included in the DSR regulation.
Lee Eunhyung, a research fellow at the Korea Construction Policy Research Institute, analyzed, "It is difficult to be confident that applying an LTV of 50% to non-homeowners and one-homeowners in regulated areas will have a significant impact on the market while regulations such as DSR remain."
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