Home Buying in 30s and 40s, 'Ability' Over 'Yeongkkeul'... "20s Invest More Aggressively"

Analysis of Purchase Purpose and Leveraged Buying Among 30s and 40s Leading Seoul Apartment Market
"Contrary to Market Concerns, Purchases Based on 'Ability' for Actual Residence... Delinquency Rate Remains at 0.4%"

Archive photo / Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Yuri Kim] Amid the recent spread of 'panic buying' in the housing market, an analysis has emerged suggesting that people in their 20s are more aggressive in purchasing homes than those in their 30s and 40s. While the 30s and 40s age group tends to buy homes with loans at a manageable level, the 20s group has a disproportionately high debt ratio.

The Korea Research Institute for Construction Industry, together with the credit rating agency Korea Credit Bureau (KCB), released the 'CERIK·KCB Housing Market Insight' report on the 3rd, stating that "Although it is true that the apartment buying spree among people in their 30s and 40s has been fierce recently, based on the price-to-income ratio (PIR) relative to household income and delinquency rates, their borrowing is closer to their capacity rather than being 'all-in' (yeongkkeul)."

According to this report analyzing buyer characteristics by age group in the metropolitan apartment market, the proportion of using other loan products excluding mortgage loans (purchase financing loans) is higher by 1.3 to 3.1 percentage points among people in their 30s and 40s compared to other age groups. Kim Seong-hwan, a senior researcher at the Korea Research Institute for Construction Industry, explained, "This phenomenon has appeared since the introduction of financial regulations, but it is difficult to say that the current usage rate of other loans is particularly higher than before. The use of other loans in home purchases has been 0.6 to 1.1 percentage points higher than the average since the first quarter of 2018."

Even when considering PIR and delinquency rates, loans taken by people in their 30s and 40s are closer to their capacity than being 'all-in.' The PIR remains below the average PIR in Seoul, and the delinquency rate is around 0.4%, indicating a stable level despite economic uncertainties caused by COVID-19.

Another reason is the low rental business participation rate among people in their 30s. The Korea Research Institute for Construction Industry and KCB analyzed that the current housing demand is not driven by speculative demand but is a result of both anxiety and income growth among people in their 30s and 40s, based on the low proportion of multi-homeowners in their 20s to 40s and the low rental business participation rate among those in their 30s. The proportion of multi-homeowners in their 20s and 30s is more than 10 percentage points lower than that of the group aged 40 and above, and even among those using loans, the 40s group has a lower proportion of multi-homeowners compared to those aged 50 and above. In particular, since the rental business participation rate and profitability are the lowest among all age groups in their 30s, it is difficult to conclude that homes were purchased for investment purposes.

Meanwhile, unlike those in their 30s and 40s, home purchases by people in their 20s show a stronger investment tendency. Senior researcher Kim said, "The proportion of homes over 20 years old (aged) purchased by people in their 20s reached 56.0%, and among multi-homeowners in their 20s, 34.5% used other loans," adding, "This confirms that this age group exhibits the most aggressive investment tendencies."

The Korea Research Institute for Construction Industry and KCB stated, "It is positive that the panic buying currently seen in the market is based on capacity rather than 'all-in' borrowing," but also warned, "Since 'all-in' and capacity can easily shift depending on interest rates, and given the strong aggressive investment tendencies among people in their 20s, caution is needed from a financial stability policy perspective." They added, "Considering the current level of real estate regulations, it seems that demand for actual residence and upgrading living spaces, rather than 'all-in' borrowing or gap investment, will dominate the market atmosphere for the time being. It is time to deeply consider supply-demand measures and institutional improvements suitable for their demand."

This content was produced with the assistance of AI translation services.