High Interest Rates and Peak Price Theories Drive Buyers Away... Lowest Number of First-Time Real Estate Buyers Ever

Average of 38,749 First-Time Homebuyers per Month Until May This Year

Rising Interest Rates and Inflation Dampen Buying Sentiment

[Asia Economy Reporter Kim Min-young] The average monthly number of first-time real estate buyers has hit an all-time low. This is attributed to the worsening domestic and international economic conditions, such as steep interest rate hikes and rising inflation, which have dampened buying sentiment. Although the government recently announced in the 'New Government Economic Policy Direction' that it would raise the loan-to-value ratio (LTV) limit to 80% for first-time homebuyers, demand is not expected to increase significantly due to the increased financial burden from rising interest rates and the debt service ratio (DSR) regulations.

According to an analysis by Zigbang of the Supreme Court Registry Information Plaza on the 20th, the number of first-time real estate buyers nationwide averaged 38,749 per month from the beginning of this year through May, marking the lowest level since related statistics began to be compiled. This is also the first time the number of buyers has fallen below 40,000. The proportion of first-time buyers among all real estate buyers was 23.9%, the lowest except for 2017 (23.6%).

In particular, the average monthly number of first-time buyers in the Seoul real estate market was 4,389, the lowest since statistics began in 2010. However, the proportion of first-time buyers among all buyers in Seoul was 30.3%, which, although lower than last year, is somewhat higher compared to the sub-30% levels seen from 2015 to 2020. Considering the overall sluggish transaction atmosphere in the Seoul real estate market, first-time homebuying appears relatively active. This confirms statistically that the 20s and 30s age group has been driving the real estate market since last year through aggressive borrowing and buying.

By age group, the average monthly number of buyers decreased across all age groups nationwide compared to the previous year. Notably, those aged 39 and under purchased an average of 19,480 homes per month this year, dropping below 20,000 for the first time since statistics began in 2010. Their share also hit a record low of 50.3%. Those aged 40 to 59 also recorded the lowest number of buyers at 15,085, and those aged 60 and above numbered 4,184. This is believed to be due to stricter loan regulations raising the threshold for homeownership and the increased financial burden from recent consecutive interest rate hikes.

Ham Young-jin, head of Zigbang Big Data Lab, analyzed, "Given the high proportion of real estate in domestic household assets, the tightening of loan regulations has been one of the causes. For non-real estate owners, it is difficult to secure funds other than loans, making it harder to enter the real estate market."

The market expects that although the new government plans to relax the LTV cap to 80% for first-time homebuyers from July regardless of region, housing price, or income, loan demand will not be significant. This is due to the sharp rise in loan interest rates and the expansion of DSR regulations starting next month, which will apply to borrowers with total loans exceeding 100 million KRW, down from the current threshold of 200 million KRW.

Ham said, "Economic conditions such as interest rates are expected to worsen further, and the financial burden will increase, making it difficult to actively utilize the government's loan expansion measures."

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