"I Bought Early Because of Uncertainty"... 20s and 30s Secure Homes in Gyeonggi and Incheon [Practical Investment]

35,000 First-Time Homebuyers in April
48.7% Purchased in the Seoul Metropolitan Area: Gyeonggi, Incheon, Then Seoul
More "My Home" Purchases in Daegu Among Regional Buyers

A view of multi-family houses and apartment complexes in Seoul. Photo by Yonhap News

The number of people who have succeeded in purchasing their first home has continued to increase from the beginning of this year up to the present. This is the first time since June 2023 that the number of first-time homebuyers has risen for three consecutive months. In particular, people in their 20s and 30s have been actively purchasing homes, with most of them buying properties in Gyeonggi Province and Incheon. In regional areas, Daegu, which has a high number of unsold homes, saw a significant volume of transactions. This trend is attributed to growing concerns about housing price instability and the anticipated tightening of financial regulations, prompting more people to buy homes earlier than planned. Experts predict that this trend is likely to continue for the time being.

35,000 First-Time Homebuyers Prefer Gyeonggi and Incheon Over Seoul

According to the Court Registration Information Plaza on May 7, the number of first-time real estate buyers last month, based on collective buildings (including officetels, apartments, row houses, and multi-family houses), was 35,440.

As recently as January, the number of first-time real estate buyers was 27,992, below the 30,000 mark. However, the figure rose to 33,870 in February and 34,374 in March, showing a steady upward trend. This three-month consecutive increase is the first in approximately 19 months, since the number grew from 29,249 in May 2023 to 33,716 in August 2023.

Among first-time homebuyers last month, those in their 30s accounted for the largest share, with 15,872 people, or 44.8%. This was followed by those in their 40s with 9,061 people (25.57%), those in their 50s with 4,700 people (13.3%), and those in their 20s (8.5%). There were even 23 minors who purchased real estate.

People in their 30s and 40s are known for their influence in the real estate market through "Yeongkkeul" (maximizing borrowing capacity). According to the Korea Institute of Finance's report "Characteristics and Implications of the Yeongkkeul Phenomenon," people in their 30s accounted for 42.5% of Yeongkkeul buyers, while those in their 40s made up 25%. Combined, these two age groups represented 67.5% of all Yeongkkeul buyers.

The majority of first-time homebuyers preferred the Seoul metropolitan area, with 48.7% purchasing real estate in this region. Among these, the largest numbers bought properties in Gyeonggi Province and Incheon. Specifically, 9,332 buyers (26.3%) chose Gyeonggi, 4,333 (12.2%) chose Incheon, and 3,611 (10.2%) chose Seoul.

As housing prices in Seoul have surged, it appears that buyers have opted for more affordable yet well-located areas outside Seoul. According to data from the Korea Real Estate Board, Seoul's comprehensive housing sales price index began a continuous upward trend after recording a 0.09% month-on-month decline in February last year. In March this year, the index rose by 0.52% from the previous month, and by 0.74% since the start of the year. In contrast, Incheon's index has been on a downward trend, dropping by 0.06% in November last year and continuing to decline, with decreases of -0.20% and -0.16% in February and March this year, respectively. Gyeonggi Province also saw a continued decline, with a 0.08% drop in January and a further 0.10% decrease the following month.

Yoon Jihae, Senior Researcher at Real Estate R114, explained, "In Seoul, relatively affordable housing is often not in the form of apartments. As buyers look to the outskirts, they are able to choose apartments, which is leading demand to shift from Seoul to the greater metropolitan area."

In Regional Areas, More First-Time Homebuyers in Daegu

Outside the metropolitan area, Daegu recorded the highest proportion of first-time home purchases. Last month, 2,805 buyers (7.8%) purchased homes in Daegu, which is 487 more than in Busan, where 2,318 buyers (6.5%) made purchases. At the beginning of this year, only 1,508 first-time homebuyers purchased real estate in Daegu. However, as housing prices continued to fall, the number of buyers increased. Among the five major metropolitan cities nationwide, Daegu's comprehensive housing sales price index fell by 1.11% this year, marking the largest decline.

The trend of first-time homebuyers entering the market is expected to continue. This is due to expectations of interest rate cuts and rising housing prices spreading throughout the market. The third phase of the Stress Debt Service Ratio (DSR) regulation, which will be implemented in July, is also seen as a major factor, prompting some buyers to rush their purchases. When the third phase of the Stress DSR is enforced, an additional interest rate (1.5 percentage points) will be applied to existing loan screening standards, making loan repayment capacity assessments even stricter. The maximum loan amount is expected to decrease significantly; for example, a borrower with an annual salary of 100 million won could borrow up to 604 million won under phase two, but this will be reduced to 556 million won under phase three for a 30-year variable-rate mortgage with principal and interest repayment.

With uncertainty over future real estate policies increasing ahead of the early presidential election scheduled for June 6, some first-time homebuyers are expected to act preemptively. Yoon Sumin, Real Estate Specialist at NH Nonghyup Bank, commented, "Recently, there have been predictions that housing prices in Seoul and other areas will rise significantly, which seems to be making first-time buyers anxious. Areas where prices were going to fall have already done so, so buyers are seeing this as the right time to enter the market." She added, "Among first-time buyers, those in their 30s mainly prefer newly built apartments. Since buying new apartments in Seoul is not easy, they are turning their attention to new developments in Gyeonggi or Incheon."