Apartment Transactions Under 600 Million "Increase" vs "Decrease"... Diverging Views on Didimdol Loan Reduction Postponement [Real Estate AtoZ]

Reduction of Didimdol Loan Limit to Take Effect on the 2nd of Next Month
"Transactions Expected to Surge Before Limit Reduction"
"Transaction Volume Already Slowing, Difficult to Increase Further"

With the reduction of the Didimdol loan limit starting from the 2nd of next month, attention has turned to whether apartment transactions in the Seoul metropolitan area will expand. Experts' opinions are divided on this matter. Some predict that transactions may increase ahead of the additional regulations, while others believe it will be difficult for transactions to rise again given the current decline caused by existing loan regulations.

"Transactions Will Cluster Due to 'Last Train Effect' Before Loan Limit Reduction"

On the 11th, Ko Jong-wan, Director of the Korea Asset Management Research Institute, said, "There is a high possibility that demand will concentrate on apartments priced under 600 million KRW in the Seoul metropolitan area due to a 'last train effect' before the Didimdol loan limit is reduced, leading to an increase in transaction volume." The Didimdol loan is a policy loan for homebuyers such as youth and newlyweds. It can be used when purchasing apartments priced up to 600 million KRW.

Director Ko explained, "From the 2nd of next month, the loan limit will be reduced by 48 to 55 million KRW," adding, "For young people who have income but no assets, this scale of limit reduction is a significant burden." He also noted, "Young people may see this month as their last chance to secure a home through the Didimdol loan amid an overall decrease in loan limits due to measures like the Stage 2 Stress Debt Service Ratio (DSR). This situation is similar to the sharp increase in transaction volume in July and August before the introduction of the Stage 2 Stress DSR in September."

There is also an analysis that apartment transactions will increase as rental demand in the metropolitan area shifts to purchase demand. Kwon Young-sun, Team Leader of the Real Estate Investment Advisory Center at Shinhan Bank, said, "Until the 2nd of next month, the Didimdol loan limit will be maintained at the current level, which may encourage rental tenants to purchase apartments," adding, "Especially in the current situation where rental prices are rising, buyers might prefer to purchase before the loan limit is reduced."

Team Leader Kwon predicted, "Due to this grace period, transaction volumes will increase considerably in Gyeonggi-do and Incheon, where the proportion of apartments priced under 600 million KRW is high." According to real estate information company Real Estate R114, as of the 1st of this month, 60% of the 1,583,691 apartments in Gyeonggi-do are priced under 600 million KRW. In Incheon, 84% of 422,605 apartments fall under this price, while in Seoul, only 13% of 1,102,505 apartments are priced below 600 million KRW.

"Even with Loan Demand, Execution Within This Month Is Difficult"

On the other hand, some view that it may be difficult for transaction volumes to increase given the market atmosphere entering a correction phase. Park Won-gap, Senior Real Estate Specialist at KB Kookmin Bank, said, "The apartment market in the Seoul metropolitan area is already in a correction phase," adding, "Due to the overall market sentiment, it is difficult for transactions to increase."

The transaction volume of apartments priced under 600 million KRW in the metropolitan area peaked in July and has been steadily declining since. According to the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system, the number of transactions for apartments under 600 million KRW in Seoul (as of the 7th of this month) dropped from 1,541 in July to 647 last month. Gyeonggi-do (9,816 → 5,694) and Incheon (2,696 → 1,610) showed similar trends during the same period.

Park predicted, "The introduction of the Stage 2 Stress DSR has already had a significant impact on the market, causing transactions to decline," adding, "Compared to that, the reduction of the Didimdol loan limit will have a secondary effect, so there will be no reversal that boosts transaction volume."

Due to strengthened existing loan regulations, it has become more difficult and time-consuming to obtain loans, making a sudden increase in loans this month unlikely. Ham Young-jin, Head of the Real Estate Research Lab at Woori Bank, said, "As financial authorities tighten loan regulations, financial institutions are requiring more documents during credit screening," adding, "In this situation, even if demand for Didimdol loans increases, it is realistically difficult for this to translate into an increase in transaction volume."