High-Interest Era... Seondanghugom? Now Seondonhugom

Unbeatable Subscription: Seoul Had 719 Unsold Houses Last Month

High Interest Rate Era Increases Burden of Buying Homes with Loans

Need to Secure Funds First, Then Consider Timing of Purchase

[Asia Economy Reporter Kim Min-young] As the high interest rate era arrives with mortgage loan variable rates soaring to the 7% range, the strategy of ‘seondanghugom’ (winning the subscription first, then worrying) is losing ground, and instead, the approach of ‘seondonhugom’ (securing funds first, then buying) is gaining traction. Even in Seoul’s subscription market, once considered unbeatable, the increase in unsold houses signals the market is at a crossroads of decline. Premature purchases with loans can lead to psychological pressure from falling house prices and increased loan interest burdens. Experts advise that in the current foggy market conditions, buying a home should be a choice rather than a necessity, and one should carefully consider the right timing after securing funds.

According to the Seoul Real Estate Information Plaza on the 25th, as of the end of last month, the number of unsold private houses in Seoul totaled 719 units. Since the beginning of this year, unsold houses in Seoul have been increasing monthly: from 47 units in January-February to 180 units in March, 360 units in April, and 688 units in May. Even in Seoul, known as an unbeatable subscription area, unsold housing stock is accumulating. The popular phrases ‘seondanghugom’ and ‘blind subscription,’ which emerged as many real demand buyers moved to the subscription market amid soaring house prices over the past few years, have become outdated due to the recent sharp interest rate hikes.

There is also advice that in the high interest rate era, the ‘seondonhugom’ stance should be taken. Global investment bank Citi recently forecasted in a report that the Bank of Korea will raise the base rate by 0.25 percentage points each in August and October, bringing the base rate to 2.75% annually, and then end the rate hike cycle. Furthermore, it predicted that a rate cut cycle could begin from July next year. If the base rate reaches 2.75% by the end of the year as Citi predicts, mortgage loan rates could soon approach 8%, and unsecured loan rates could near 9%. This means the interest burden on real demand buyers who must purchase homes with loans will increase significantly.

Park Won-gap, Senior Real Estate Specialist at KB Kookmin Bank, said, "It is meaningless to time the market without having money to buy a house," adding, "Now is the time for ‘seondonhugom,’ meaning you should secure funds first and then consider timing." This implies that during the market freeze and interest rate hike period, there is concern about further price drops, and the amount of funds available depends on the extent of interest rate increases, so buyers need to be cautious.

He advised, "In a foggy market, buying a home is a choice rather than a necessity," and recommended, "Buyers should take a pause until the market stabilizes."

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