Financial authorities are closely monitoring whether the designation of land transaction permit areas in the three districts of Gangnam (Gangnam, Seocho, and Songpa) and Yongsan in Seoul will spread investment demand to surrounding areas. Unlike last year, when household loans in the metropolitan area, including Seoul, faced heightened thresholds, there are plans to implement 'fine-tuned regulations' on certain areas where housing prices have surged. This is because demand for gap investment (purchasing dwellings with jeonse leases) could quickly shift to regions outside the regulations.
According to the financial sector on the 20th, the Financial Services Commission is analyzing trends in household loans and housing prices in Seoul by subdividing the entire city into districts, starting this week, and has included the regions of Gyeonggi, Gwacheon, Seongnam, and Hanam. Previously, only the three districts of Gangnam, Mapo, Yongsan, and Seongdong, Dongdaemun, and Seodaemun were monitored and managed for household loans on a weekly basis. A Financial Services Commission official noted, 'We are closely monitoring the trends by subdividing regions because we do not know where household loans will spike, and proactive management is crucial at this point.'
The Financial Services Commission does not rule out the possibility of a 'balloon effect' following the announcement of the designated land transaction permit areas. With gap investment being restricted in the Gangnam area, rental listings are decreasing, leading to rising rents and the dispersal of investment demand. As a result, housing prices in areas like Mapo, Seongdong, Gangdong, and Dongjak, which are outside the regulations, could rise. According to the Korea Real Estate Board, the rate of increase in housing prices for transactions in Mapo and Seongdong districts for the third week of March was 0.29% and 0.37%, respectively, widening compared to the previous week. This is similar to the level in Yongsan, which is also bound by the land transaction permit area (0.34%). While the government has warned that additional land transaction permit areas could be designated if the market overheating continues, there are predictions that the overall demand for housing purchases will not dip, given the ongoing housing supply shortage and the possibility of further interest rate cuts.
The reason financial authorities are unusually tightening management of household loans is to block speculative demand in the housing market. To this end, they have requested banks to strengthen lending regulations. Kwon Dae-young, Secretary-General of the Financial Services Commission, stated at a briefing after a meeting with real estate-related agencies that 'the government has requested the financial sector to self-block speculative demand,' adding, 'The banking sector will take action in March.' Banks are considering limiting new home loans and conditional jeonse funding for multi-homeowners only in areas where housing prices have surged in the short term or where lending demand is concentrated.
What financial authorities are focusing on is the increase in household loans in April. It generally takes 1-2 months for loans to be executed after a housing transaction, and given that the volume of housing transactions surged last month, there is a high possibility that household loans will significantly increase in April. According to the city of Seoul, the housing transaction volume in February was 8,910, a 50% increase compared to January (5,941). Financial authorities have stated that if the trend of increasing household loans continues in April and May, they will implement additional regulations without delay. Discussions are being held regarding region-specific differentiation of the three-stage stress Debt Service Ratio (DSR) and expanding its scope.