"Afraid They'll Never Buy, Worried Prices Will Soar"... Young People Taking Out Loans for Their First Home in Seoul [Real Estate AtoZ]

First-Time Homebuyers Exempt from LTV Restrictions
Higher Loan Limits Give Them an Advantage in Purchasing Homes
Rising Prices and Fears of Future Regulations Fuel Buying Demand

View of an apartment complex in Seoul. Photo by Yonhap News Agency

Since the October 15 measures, the number of first-time homebuyers in Seoul has increased. Although the government imposed multiple layers of regulations across Seoul and key areas of Gyeonggi Province to stabilize housing prices, more people have started buying homes due to concerns that prices might rise even further. In particular, this round of regulations excluded first-time homebuyers, but there is growing anxiety that if prices continue to rise, they may be included in future regulations, which has fueled buying sentiment.

According to the Court Registration Information Plaza on the 31st, after Seoul was designated as a regulated area and an overheated speculation zone under the October 15 measures, the proportion of first-time buyers among those who purchased collective housing (such as officetels, apartments, row houses, and multiplex houses) in Seoul from October 16, when the regulations took effect, to October 29 was 32.8%. This is 1.8 percentage points higher than the 31.1% recorded from October 1 to 15, before the regulations were implemented. It is also 0.5 percentage points higher than the previous month's figure of 32.3%.

Most of the people who purchased homes in Seoul for the first time were found to be young adults. Those in their 30s accounted for 52.1%, making up more than half of the total. Many of them are seeking to purchase a home due to reasons such as marriage, but with insufficient savings, they are turning to first-time homebuyer loans to finance their purchases. The next largest groups were those in their 40s (20.1%), followed by those in their 20s (11.9%), and those in their 50s (9.3%).

The increase in purchases by people without homes appears to be driven by the sentiment of "buy before prices rise even further." According to data released the previous day by the Korea Real Estate Board, as of October 27, apartment sale prices in Seoul rose by 0.50% compared to the previous week. This marks 38 consecutive weeks of increases, with prices rising in all 25 districts. In particular, although the current administration has introduced strong regulations, it has maintained the loan-to-value (LTV) ratio for first-time homebuyers at 70%. This has led to growing concerns that even this option may be blocked by future regulations.

In fact, the proportion of first-time homebuyers has been declining since the Lee Jaemyung administration took office. After reaching 36.1% in June, the figure dropped to 35.9% in July, when the June 27 measures restricting loans were implemented, and further to 34.6% in August. As housing prices soared and the government continued to announce real estate measures, more people have taken a wait-and-see approach.

The fact that first-time homebuyers have higher loan limits than other buyers is also cited as a factor enabling them to purchase homes. For people without homes, the LTV ratio in regulated areas was reduced from 70% to 40% under the October 15 measures, and those who already own homes are not eligible for loans at all. In contrast, the conditions for first-time buyers remain unchanged, putting them in a more advantageous position in the competition for loans and home purchases compared to other borrowers.

Most of those purchasing homes for the first time are people in their 30s with limited capital, leading to more transactions in relatively affordable areas. In addition, buyers must purchase homes priced at 1.5 billion won or less to borrow up to the maximum mortgage loan limit of 600 million won and take advantage of the 70% LTV ratio. From October 16 to 29, the districts in Seoul with the highest number of first-time homebuyers were Gangseo-gu (134 people), Nowon-gu (115 people), Dongdaemun-gu (112 people), and Eunpyeong-gu (108 people).

Kim Hyosun, Chief Real Estate Specialist at NH Nonghyup Bank, stated, "Currently, the amount of loans one can receive is a more important factor in deciding on a home purchase than interest rates, so the 70% LTV ratio is significant. With interest rates relatively stable, the relaxed LTV criteria for first-time homebuyers make it a favorable strategy for those looking to purchase their own home."