[Column] Must You Live in a Cheap House to Be a Genuine Buyer?

[Asia Economy Reporter Park Sun-mi] A person who actually needs to buy or obtain something. This is the dictionary definition of ‘real demand.’ The scope of real demand as determined by the government and financial authorities is strictly based on ‘price.’ This is evident in the current household debt management approach. Even if the purpose is actual residence, a person obtaining a house priced above the standard is not considered a real demand buyer.

One of the main frameworks of the debt measures recently announced by the authorities is the protection of real demand buyers. Loans are restricted, but exceptions are made for those who genuinely need money rather than for investment. The problem lies in the view that people living in high-priced jeonse (long-term lease) housing are not considered real demand buyers. The Financial Authorities’ Household Debt Management Task Force (TF), launched on the 1st of this month, discussed a plan not to provide guarantees for high-priced jeonse loans. They have begun reviewing restrictions on guarantees by SGI Seoul Guarantee Insurance, which is considered the only financial channel for high-priced jeonse.

The ceiling standard is yet to be determined. The Korea Housing Finance Corporation (KHFC) and the Housing and Urban Guarantee Corporation (HUG) set the jeonse price ceiling at 500 million KRW in the metropolitan area and 400 million KRW in other regions. According to KB Kookmin Bank data, the average jeonse price for apartments in Seoul last month was 657.2 million KRW. Since the new lease law, which includes the right to renew contracts and caps on rent increases, was implemented at the end of July last year, jeonse prices have been rising rapidly every day.

In the past three years, the number of 84㎡ (exclusive area) apartments with jeonse prices exceeding 1.5 billion KRW has surged from 3 to 53 complexes. If the ‘price’ criterion is applied to define real demand buyers, a significant number of high-priced jeonse tenants will be unable to obtain jeonse loans from banks.

The exclusion of high-priced housing from the real demand buyer category is the same in the housing sales market. The government has blocked mortgage loans for houses priced above 1.5 billion KRW, even for high-income earners with sufficient debt repayment capacity.

Even if a non-homeowner tries to purchase a single home for actual residence, bank loans are restricted if the house price exceeds 1.5 billion KRW. The average apartment price in Seoul has risen by 100 million KRW in just six months, surpassing 1.2 billion KRW. The average price in the Gangnam area is approaching 1.5 billion KRW. Although there is a need to ease financing conditions for high-priced apartment buyers who are real demand buyers with one home, this is not being considered at all under the current administration.

If the principle was originally set to supply funds primarily to real demand buyers, those who actually reside without speculative intent should be protected. The reality that apartment sale and jeonse prices are soaring must also be taken into account. Must one live in a cheap house to be considered a real demand buyer?

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