Cancellations of Apartment Contracts Over 1 Billion Won Surge After Lending Restrictions... Concerns Over Falling Home Prices

Buyers Accept Deposit Losses Amid Fears of Buying at the Peak
Cancellations Rise for Apartments Priced Over 1 Billion Won

Apartments in the Jamsil Area

Following the implementation of the June 27 policy, which limits the maximum amount of home mortgage loans in the Seoul metropolitan area to 600 million won, the proportion of canceled contracts for high-priced apartments exceeding 1 billion won has increased.

According to the real estate brokerage firm Jiptos on July 16, the share of canceled contracts for apartments priced over 1 billion won among all reported cancellations after the new lending restrictions was 35%. This represents an increase of 8.1 percentage points compared to the 26.9% recorded before the policy announcement.

In contrast, the proportion of canceled sales contracts for apartments priced at 500 million won or less dropped from 32.2% to 25.1%, and for those priced between over 500 million won and up to 1 billion won, the figure decreased from 40.9% to 40.0%.

It appears that the higher the investment amount for expensive apartments, the greater the potential loss if prices fall in the future. As a result, buyers who felt the burden of having bought at the peak chose to cancel transactions even at the cost of losing their deposits.

In particular, in Seocho-gu, where high-priced apartments are concentrated, the share of canceled contracts rose from 2.5% before the policy announcement to 5.7% after. In Gangnam-gu, the proportion increased from 5.1% to 6.5%.

Districts where housing prices had not risen significantly, such as Nowon-gu (from 5.3% to 7.3%), Dobong-gu (from 1.4% to 1.9%), and Gangbuk-gu (from 1.3% to 1.9%), also saw an increase in the proportion of canceled sales contracts. This is interpreted as 'Yeongkkeul' buyers canceling contracts out of concern for future price declines and rising interest burdens.

Lee Jaeyoon, CEO of Jiptos, said, "This policy has sent a strong message to the market that 'housing prices will be adjusted.' For buyers of high-priced apartments, it has triggered a defensive asset mindset, while for 'Yeongkkeul' buyers, it has stimulated a desire to minimize losses, both leading to the same behavior of contract cancellations."