Only 3% of Apartments in Seoul Are Affordable at Median Income Level

Sharp Decline in 1 out of 3 Houses Compared to 10 Years Ago

Although several months have passed since housing prices began to decline, it has been found that only 3% of apartments in Seoul are affordable for middle-income households. According to data from the Korea Housing Finance Corporation (HF) on the 8th, last year’s nationwide Housing Purchase Quantity Index was recorded at 47.0, up 2.4 points from the previous year (44.6). However, it still remains below 50.

Photo by Yonhap News

The Housing Purchase Quantity Index measures the ability to purchase housing. It shows the proportion of homes that middle-income households can afford on a scale from 0 to 100. A score of 100 means that middle-income households can purchase 100% of the homes. The lower the number, the fewer homes are affordable for middle-income households.

The index is calculated using the Bank of Korea’s mortgage loan interest rates for deposit banks (newly issued), apartment market prices from the Korea Real Estate Board, household income of urban workers from Statistics Korea, and the total monthly wages of full-time employees in businesses with five or more workers from the Ministry of Employment and Labor.

By region, Seoul’s Housing Purchase Quantity Index last year was 3.0. This means that, based on the net assets and income of middle-income households in Seoul, only 3% of apartments are affordable even with loans.

Seoul’s Housing Purchase Quantity Index was over 30 at 32.5 in 2012 but dropped to 20.2 in 2016 and further to 16.5 in 2017. After falling below 20, it declined to 12.8 in 2018, 13.6 in 2019, 6.2 in 2020, and 2.7 in 2021. Just ten years ago, one out of three homes in Seoul was affordable for middle-income households, but last year, only 3 out of 100 homes were affordable.

Gyeonggi Province had the second-lowest Housing Purchase Quantity Index last year at 33.5, followed by Incheon (39.7), Busan (44.6), and Jeju (47.4), all below 50%, indicating that less than half of homes were affordable for middle-income households.

Sejong (50.4), Daejeon (52.2), Daegu (56.6), Gwangju (63.1), and Ulsan (64.9) recorded indices in the 50s to 60s, while Chungbuk (75.5), Gyeongnam (75.9), Jeonbuk (77.1), Gangwon (78.2), Chungnam (78.8), Jeonnam (84.2), and Gyeongbuk (85.7) were in the 70s to 80s.

The Housing Purchase Burden Index, which hit a record high in the third quarter last year, showed a downward trend. This index represents the repayment burden when a median-income household takes out a standard loan to purchase a median-priced home. If mortgage repayments account for about 25% of household income, the index is calculated as 100. A higher index indicates a heavier housing purchase burden.

In the fourth quarter of last year, the nationwide Housing Purchase Burden Index was 81.4, down 7.9 points from 89.3 in the third quarter. The nationwide index had consecutively set new records for four quarters from the fourth quarter of 2021 (83.5) through the first (84.6), second (84.9), and third quarters (89.3) of last year. The decline in the fourth quarter was due to a drop in mortgage loan interest rates while median household income increased by 1.8% during the same period.

Seoul’s Housing Purchase Burden Index was 198.6, approaching 200. This means that middle-income households in Seoul must allocate nearly half of their income to repay principal and interest on mortgage loans when purchasing a median-priced home in the area.

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