Rental Market Instability... 2030s Buying Homes Again

1,624 Apartment Purchases in Seoul in April

42.3% by Those Aged 30 and Under, Highest This Year

[Image source=Yonhap News]

[Asia Economy Reporter Kim Min-young] Despite strengthened loan regulations and interest rate hikes since the beginning of this year, the proportion of apartment purchases in Seoul by the 20s and 30s generation is increasing. It is interpreted that as the number of jeonse (long-term lease) listings has decreased mainly in Seoul and the metropolitan area, and the financial burden has increased due to interest rate hikes, more young people are choosing to secure their own homes even if it means a smaller unit. However, there are also forecasts that the aggressive buying trend of the 20s and 30s generation seen last year will be difficult to reproduce due to perceptions of high home prices, the possibility of further interest rate hikes, and supply policies.

According to the apartment sales statistics by buyer age group from the Korea Real Estate Board on the 2nd, the number of apartment sales in Seoul in April was 1,624 (based on the reporting date), of which 687 units (42.3%) were purchased by those aged 30 and under. Both the number and proportion of apartment purchases by those aged 30 and under in Seoul last month were the highest records this year. It is also the highest in seven months since September last year.

The proportion of apartment purchases in Seoul by those aged 30 and under began to increase significantly in August 2020 (40.4%), when housing prices surged. At that time, the purchase proportion of the 20s and 30s generation exceeded 40% for the first time and peaked at 44.1% in September last year before declining. In particular, this proportion dropped to 36.0% in February this year but changed after the presidential election ended in March. The proportion of apartment purchases in Seoul by those aged 30 and under rose to 40.7% in March, up 4.7 percentage points from 36.0% in February, recovering to the 40% range again, and the increase expanded further last month.

Following the presidential election, expectations for the new government's real estate regulation easing policies led to a slight recovery in apartment transaction volumes in Seoul, and apartment prices rose in some areas, prompting the 20s and 30s generation to resume purchases. Additionally, the recent decrease in jeonse listings and rising jeonse prices, causing instability in the jeonse and monthly rent market, also influenced this buying trend. In fact, among the 25 districts of Seoul, the proportion of apartment purchases by those aged 30 and under increased mainly in outer areas. In Nowon-gu, out of 161 transactions, 89 (55.3%) were purchased by the 20s and 30s generation, accounting for 55.3% of total transactions. High purchase proportions by the 20s and 30s generation were also seen in △Gwanak-gu (55.6%) △Seongbuk-gu (50.7%) △Geumcheon-gu (47.6%) △Guro-gu (45.7%).

However, it is unlikely that the buying movement by young people aged 30 and under will lead to a buying frenzy like last year. This is because the burden of home purchases for the 20s and 30s generation with limited financial capacity has increased due to loan regulations, interest rate hikes, and rising pre-sale prices. Although the government recently announced plans to lower the loan threshold for young people, there are forecasts that mortgage loan interest rates will reach 7% per annum, making it difficult for demand to increase significantly by forcing home purchases. Ko Jong-wan, head of the Korea Asset Management Research Institute, said, "With rising pre-sale prices and ongoing loan regulations, and mortgage loan interest rates reaching 7% per annum, there are limits for young generations to chase purchases, so I believe the current situation is unlikely to continue."

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