Loan Regulations and Interest Rate Hikes Freeze the Desire to Buy a House

Due to Strict Loans and Rising Market Interest Rates
Seoul Apartment Market Turns from Buyers to Sellers After 7 Months

Gangnam 4 Districts See Largest Drop in Sales Supply Index
New Record Prices Still Appear... Housing Price Polarization Deepens

[Asia Economy Reporter Kim Hyemin] The Seoul apartment sales market has shifted to a 'seller's market' for the first time in seven months, which is interpreted as a result of buyers adopting a wait-and-see stance. With stricter loan regulations and rising interest rates, it has become difficult to secure funds, dampening the desire to buy homes. Analysts also point to fatigue from the rapid surge in housing prices over a short period last year and continuing into this year.

◆ Buyer sentiment plunges due to surge fatigue and loan regulations = The government has tightened household debt management in the financial sector since the second half of this year. With major banks consecutively halting mortgage loans and strengthening loan screening, the barrier to securing funds has risen sharply, causing buyer sentiment to shrink rapidly. Interest rates have also risen steeply, increasing the burden on buyers. The average mortgage loan interest rate at the five major commercial banks rose from the high 2% range at the end of June to the mid-3% range by the end of last month. With the possibility of further base rate hikes increasing, some forecasts predict rates will exceed 5% within the year. This makes it difficult to buy homes with loans.

Additionally, since 2018, housing prices have soared to unprecedented heights, creating a widespread perception that prices have peaked. With major events such as the presidential election in March next year approaching, the sentiment to wait and see has grown stronger.

◆ Seller's market shift even in Gangnam area = When dividing Seoul into five zones, except for the downtown area including Yongsan, Jongno, and Jung-gu, the sales supply-demand index fell below 100 in all zones. The northwest area, including Eunpyeong, Seodaemun, and Mapo districts, has been below 100 for two weeks, showing the greatest decline in buyer sentiment. The northeast area, where mid- to low-priced complexes are concentrated, dropped from 101 last week to 99.4 this week.

Notably, buyer sentiment has also weakened in the Gangnam area, where loans are difficult to obtain. The sales supply-demand index in the southeast area, which includes the four Gangnam districts, fell to 99.5 this week, showing the largest decline.

As buyer sentiment weakens, Seoul apartment listings are gradually accumulating. According to real estate big data company Apartment Real Transaction, as of the 19th, Seoul apartment sales listings totaled 44,687, a 6.7% increase compared to a month ago.

◆ Record prices vs. urgent sales... mixed transaction trends = However, Seoul apartment sales prices continue to rise. Although the rate of increase has slowed, the average weekly change rate has been on an upward trend for nearly a year and a half since the end of May last year. Some complexes are still seeing record prices. For example, an 84㎡ (exclusive area) unit in Godeok Gracium, Godeok-dong, Gangdong-gu, was traded for 2 billion KRW on the 26th of last month, rising by 110 million KRW in just over a month.

On the other hand, in northern Seoul, falling transactions are occurring one after another, reflecting the impact of weakened buying demand. A 58㎡ unit in Sanggye Jugong Complex 3, Nowon-gu, was traded for 600 million KRW on the 10th of last month, down 185 million KRW from the previous transaction at the end of April (785 million KRW). Similarly, a 60㎡ unit in Ssangyong, Chang-dong, Dobong-gu, was traded for 809 million KRW on the 1st of last month, dropping 20 million KRW in just half a month.

Ye Kyung-hee, chief researcher at Real Estate R114, said, "In the Gangnam area, where loans are difficult to obtain from the start, the desire to buy a solid single property means that although transactions decrease, prices are unlikely to fall sharply. However, in the mid- to low-priced and owner-occupied markets where buyers rely on loans, if loan regulations tighten or interest rates rise, both buyer sentiment and prices are bound to slow down, leading to a clear polarization of prices by region."

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