Seoul, Continued Rise in Sale and Jeonse Prices

No Decline Areas in All 25 Districts of Seoul
Sales Up 0.02%, Jeonse Up 0.03%

Despite Base Rate Cut,
Buyers Confused by Comprehensive Loan Regulations

On the 15th, Seongsan Sijeong Apartment in Seongsan-dong, Mapo-gu, Seoul. Seongsan Sijeong Apartment is a complex completed in 1986, consisting of 33 buildings with up to 14 floors and 3,710 households. Photo by Jin-Hyung Kang aymsdream@

As the Bank of Korea lowered the base interest rate, the real estate market expected an increase in purchase demand, but it has not been easy due to government loan regulations. Buyers with insufficient funds are wavering between buying and renting.

On the 19th, Real Estate R114 announced the 'Major price change rates for the third week of October in the metropolitan area' and analyzed, "When purchase prices slow down, jeonse (long-term lease) prices tend to spike relatively, or when jeonse prices slow down, purchase prices tend to spike relatively. Also, when purchase volume decreases, demand shifts to the jeonse and monthly rent market, resulting in an increase in jeonse and monthly rent transaction volumes in some cases."

They added, "Since housing is directly related to survival, even with loan regulations in place, the total combined demand for purchase and jeonse/monthly rent does not change significantly."

Seoul apartment purchase prices rose by 0.02%, with the rate of increase slowing compared to the previous week. Both reconstruction and general apartments increased by 0.02%. New towns recorded a flat rate (0.00%) for four consecutive weeks, showing limited price movement. Gyeonggi and Incheon also shifted from rising trends to flat (0.00%). Overall, Seoul is considered to be leading the price movements in the metropolitan area.

Despite the government's strengthened loan regulations, there were no districts in Seoul among the 25 districts that experienced price declines. Individual areas rose in the order of Gwangjin (0.09%), Dongjak (0.07%), Nowon (0.06%), Mapo (0.05%), Seocho (0.03%), and Gangseo (0.03%). In Gwangjin-gu, large complexes such as Guui Hyundai 2nd Complex, Hyundai Prime, and The Sharp Star City in Jayang-dong saw increases of 5 to 10 million KRW.

All individual areas in new towns showed flat rates (0.00%). In Gyeonggi and Incheon, prices rose in Hwaseong (0.10%), Icheon (0.06%), and Uijeongbu (0.02%), while other areas remained flat (0.00%) with limited fluctuations.

In the jeonse market, Seoul's prices increased by 0.03%, up 0.01 percentage points from the previous week. Meanwhile, new towns and Gyeonggi and Incheon showed flat (0.00%) and 0.01% changes respectively, moving at a slightly firm level.

In Seoul's individual areas, Nowon (0.11%) rose more than 0.10% over the week, followed by Geumcheon (0.08%), Seongdong (0.06%), Mapo (0.06%), Yangcheon (0.05%), Songpa (0.04%), and Dongjak (0.04%).

In new towns, Ilsan (0.02%) and Paju Unjeong (0.01%) rose, while all other areas remained flat (0.00%). In Gyeonggi and Incheon, prices increased in Suwon (0.06%), Guri (0.02%), Siheung (0.01%), Gimpo (0.01%), and Incheon (0.01%).

A Real Estate R114 official said, "The government's loan regulations are targeting the Didimdol Loan, one of the low-interest policy loan products, causing increased burdens on actual buyers due to interest rate hikes and reduced limits on this product."

He added, "Recently, the Ministry of Land, Infrastructure and Transport and the Housing and Urban Guarantee Corporation (HUG) sent a request letter to commercial banks to restrict the handling of Didimdol Loans. The letter's key point regarding the 'room deduction' means that if the small rental deposit amount subject to the highest priority repayment under the Housing Lease Protection Act (55 million KRW in Seoul) is mandatorily deducted, the loan limit will suddenly decrease by tens of millions of KRW. This is scheduled to be applied from the 21st, causing increased confusion among actual buyers who were preparing the balance payment after paying the deposit."

Furthermore, "Since the main target of Didimdol Loans is mid-to-low priced properties under 500 to 600 million KRW, complaints are expected to rise significantly among demanders planning to purchase homes using policy mortgage products mainly in the metropolitan area (Gyeonggi, Incheon) rather than Seoul," he said.