Amid Rising Household Debt, "2030 Generation, Apartments, and Mid-sized Homes Lead Increase in Housing Transactions"

Analysis by Hana Financial Management Research Institute
Restriction on Housing Price Increase Due to Suspension of Special Bogeumjari General Type and Interest Rate Rise
Household Debt Growth Rate Expected to Remain at 1.5% Next Year

On the 14th, in a real estate-dense shopping district in Songpa-gu, Seoul, where the decline in real estate prices and the transaction freeze phenomenon continue, apartment listings with market prices are posted. Photo by Kang Jin-hyung aymsdream@

'20s-30s, apartments, and medium-sized houses' are the three main factors driving the increase in housing sales transactions this year. According to the Korea Real Estate Board, the number of housing sales transactions doubled from January (25,761 cases) to August (51,578 cases) this year. Consequently, household debt also increased. According to the Bank of Korea, the outstanding balance of mortgage loans at deposit-taking institutions in South Korea increased by 6.518 trillion KRW during the same period (January: 754.3327 trillion KRW → August: 760.8507 trillion KRW).

On the 3rd, Hana Financial Management Research Institute analyzed in its report "Trends in Market Fund Flows and Key Issues" that '20s-30s, apartments, and medium-sized houses' led the increase in transactions. The report stated, "Although the highest proportion of sales transactions is among those in their 40s and 50s, the share of transactions by people in their 20s and 30s has increased since the special Bogeumjari loan was introduced."

The special Bogeumjari loan was actively offered starting February this year. Until January, the share of transactions by people in their 20s and 30s was 25.5% of the total, but it rose to 28.6% in August. The report predicted, "Although the burden of raising funds has eased, increasing the share of transactions by people in their 20s and 30s, the disappearance of the general type of special Bogeumjari loan may lead to a decrease in their transaction share going forward."

By housing type, since the first quarter of this year when apartment price declines deepened, low-price buying demand increased, causing the share of apartment transactions to surge (January: 69.2% → August: 76.1%). Due to price declines, the share of transactions for medium-sized houses (61?100㎡) increased (41.4% → 44.3%) compared to small houses (60㎡ or less).

Real estate stock photo / Photo by Mun Ho-nam munonam@

While it was expected that the perception of a bottom and recovery of buying sentiment would sustain the recovery of sales and jeonse prices, the increase is anticipated to be limited. The report stated, "In the last quarter, actual apartment transactions were led by apartments priced under 600 million KRW, which are eligible for the special Bogeumjari loan, accounting for 81% of the total," and added, "Mortgage loan demand will increase mainly in the Seoul metropolitan area where price growth potential is high, but the rise in transaction volume will be limited due to high interest rates."

It continued, "With the suspension of general special Bogeumjari loan handling, the burden of raising funds has increased, which will somewhat slow the price increase," and "If household debt management regulations such as narrowing DSR (Debt Service Ratio) exceptions and applying tiered interest rates on LTV (Loan-to-Value ratio) are implemented, the price increase will be restrained."

Next year, as policy mortgage supply decreases, demand for housing sales transaction funds is expected to concentrate on general housing loans from commercial banks. The report stated, "However, due to the government's efforts to curb household loans and the increased interest burden from rising loan rates, the household loan growth rate next year is expected to be around 1.5%, lower than this year."

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