[Apartment 'Big Spenders' in Their 30s]① "If Not Now, Never" Anxiety Grows Amid Interest Rate Peak Theory

Apartment Purchase Share 26.6%... Highest Among 30s Heads of Household
6 Out of 10 Subscription Winners Are '30s or Younger'

#Park (31), a resident of Gangseo-gu, Seoul, recently purchased an older apartment in Bucheon, Gyeonggi Province, valued at around 400 million KRW, using a special BoGeumJaRi loan. He had planned to live in his current monthly rental apartment for about four years, but when a property in his desired price range appeared, he decided to move after just one year. Park said, “I thought housing prices hit bottom earlier this year, so I hurried to buy. I also saw the special BoGeumJaRi loan’s graduated repayment option and the ability to refinance later without fees as advantages.”

#Lee (30), an office worker, applied for all the apartment complexes offered in Seoul during the first half of this year. He believed the threshold for subscription had significantly lowered due to an increase in lottery-based allocations and the easing of interim payment loan restrictions. Lee said, “Prices keep rising, and if I do nothing, it will be impossible to own a home in Seoul. So, I’m applying for all complexes in Seoul and plan to ‘win first, worry later’.”

People in their 30s are rapidly emerging as major players in the real estate market. From January to May this year, they accounted for the largest share of apartment purchases among all age groups. This is interpreted as a result of the perception that housing prices have bottomed out and the expansion of loan capacity through the introduction of special BoGeumJaRi loans, prompting active purchases of urgent sale properties. Although they had been relatively excluded from subscription due to lower scores, reforms in the subscription system, such as increased lottery allocations, have enabled them to lead the subscription market as well.

‘Learning Effect’ from Real Estate Surge... Increased Loan Capacity with Special BoGeumJaRi Loan

According to the Korea Real Estate Board’s data on apartment sales by buyer age group, from January to May this year, there were a total of 163,815 apartment transaction reports nationwide, with those in their 30s accounting for 26.6% (43,590 transactions). This is the highest figure recorded for the January-May period since the survey began in 2019. The shares were 23.5% in 2019, 22.9% in 2020, 25.2% in 2021, and 22.9% in 2022.

Until now, the apartment sales market had been dominated by the economically stable 40s age group. However, for the first time this year, the share of buyers in their 30s was the highest among age groups in apartment purchases. The 40s share for January-May was 28.1% in 2019, 27.4% in 2020, 25.8% in 2021, and 24.2% in 2022, consistently higher than that of the 30s. But this year, it recorded 25.9%, trailing the 30s by 0.7 percentage points.

The gap between the 30s and 40s in apartment purchases in Seoul was even wider than the national average. From January to May this year, the share of apartment purchases by those in their 30s in Seoul was 32.9% (4,397 out of 13,373 transactions), while the 40s accounted for 27.8% (3,716 transactions). Notably, the number of apartments bought by people in their 30s in Seoul is soaring. In May, out of 3,711 apartment transactions in Seoul, 1,286 were by those in their 30s, the highest monthly figure in 20 months since September 2021’s 1,505 transactions.

The increase in buying power among people in their 30s is analyzed as a ‘learning effect’ from the previous real estate surge. Those who missed the chance to own a home during the last surge feared they might never get another opportunity, so they actively purchased urgent sale properties that flooded the market from early this year. Professor Park Hap-su, adjunct professor at Konkuk University Graduate School of Real Estate, said, “The current 30s generation has directly or indirectly experienced housing prices doubling from 500 million KRW to 1 billion KRW during the surge. Even those who had been watching the market started buying urgent sale properties priced 20-30% below the peak, around 700 to 800 million KRW, which they judged to be relatively affordable.”

Moreover, experts analyze that the special BoGeumJaRi loan, launched at the end of January, ignited the buying spree among people in their 30s. Professor Park explained, “People in their 30s have had limited loan capacity due to criteria like DSR (Debt Service Ratio) because of relatively lower incomes. This year, they can borrow up to 500 million KRW at a low fixed interest rate for homes priced under 900 million KRW regardless of income level, significantly lowering the threshold to purchase mid-to-low priced apartments they had been eyeing, which likely influenced their buying behavior.”

The easing of youth-targeted loan regulations is also cited as a cause. Since August last year, the government raised the LTV (Loan-to-Value ratio) for first-time homebuyers uniformly to 80%, regardless of housing price or region. The loan limit was also expanded from 400 million KRW to 600 million KRW, greatly lowering the barrier for young people to own homes.

Increased Lottery Allocations Create More Opportunities for Low-Score Applicants... “Prices Are Cheapest Now”

The strength of those aged 30 and under is also evident in the apartment subscription market. According to the Korea Real Estate Board’s recent data on subscription winners by age, among the 25,525 people who won new apartment subscriptions from January to May this year, 14,125 were aged 30 or younger, accounting for 55.3%. This means about six out of ten winners are 30 or younger.

This is believed to be due to reforms in the subscription system that expanded opportunities for younger people, who had been excluded under the score-based system, to obtain apartments through lotteries. In April, the government lifted many regulations, increasing the lottery allocation for small-to-medium apartments under 85㎡ in speculative overheated zones from 0% to up to 60%. Additionally, the government allowed interim payment loans regardless of the sale price and significantly shortened resale restriction periods, reducing the financial burden on young subscription applicants.

The expectation that prices will continue to rise is another reason young buyers flock to the subscription market. According to the Housing & Urban Guarantee Corporation (HUG), as of May, the average sale price per square meter for private apartments in Seoul was 9,414,000 KRW, up 10.11% from last year and 1.38% from the previous month. This translates to over 31 million KRW per 3.3㎡ (pyeong). The rise is attributed to increased material and labor costs as well as soaring financial expenses.

A representative from a major construction company said, “With rising costs for materials and other expenses, it’s unlikely that sale prices will drop. Among young end-users who prefer new apartments, there is a growing perception to use subscription accounts before prices rise further, which is also driving up competition rates.”

However, experts advise caution, noting that the housing market still faces risks from macroeconomic variables and economic downturns, and buyers should carefully consider whether they can withstand price declines and interest rate hikes. Yoon Soo-min, a real estate specialist at NH Nonghyup Bank, said, “Although housing prices are recovering mainly in the metropolitan area, it’s uncertain how much further they can rise, and the possibility of additional US interest rate hikes remains. Buyers should thoroughly assess their financial capacity and be cautious about purchasing homes with excessive loans.”