Mr. A accumulated funds with the goal of applying for a new apartment, but after July, applying the stress debt service ratio (DSR) phase 3 resulted in a decrease of about 30 million won in the housing mortgage loan limit. Ultimately, Mr. A had to transact the rights to a pre-sale apartment in a complex that was about to be occupied, as there were no newly-built projects in the desired area before July.
Demand is concentrating on pre-owned apartments that are not affected by lending regulations to escape the 'phase 3 stress total debt service ratio (DSR)' being implemented in July in the Seoul metropolitan area, including Gyeonggi Province.
According to the real transaction disclosure system of the Ministry of Land, Infrastructure and Transport on the 2nd, there were 123 transactions of pre-sale rights at 'Indeokwon Xai SK VIEW' in Naeson-dong, Uiwang City, Gyeonggi Province from March 1 to about three months. 'Hillstate Monte Roy 2BL' in Cheoin-gu, Yongin City, started moving in early this year and saw 74 transactions during the same period. 'Gwangmyeong Central I-Park' in Gwangmyeong City, scheduled for occupancy in November, also had 42 transactions.
The stress DSR is a system that reduces the loan limit by adding a stress additional charge to the loan interest rate for financial consumers. The government has gradually introduced stress rates. In February of last year, phase 1 applied a 0.38% stress rate to bank mortgages, and in September of the same year, phase 2, which increased it to 1.2% in the metropolitan area and 0.75% in non-metropolitan areas, was implemented.
When phase 3 is implemented, the stress rate will be applied to total household loans across the entire financial sector. An additional charge of 1.5% will be applied to housing mortgage loans (mortgages) and so forth. With the application of phase 3, the loan limit for financial consumers with an annual income of 50 million won will decrease by up to 50 million won compared to before.
However, loans for collective lending of new apartments that had recruitment notices for occupants before June 30 of this year or mortgages for real estate sale contracts will be issued after July under the existing phase 2 measures, thus setting the limits. Accordingly, those who wish to purchase new properties are shifting their focus to pre-owned complexes.
In fact, there have been many inquiries at nearby certified brokerage offices for complexes that have recently completed occupancy or that are about to be occupied. A representative from a brokerage office in Naeson-dong, Uiwang City, noted, 'Recently, housing prices have risen significantly and the volume of supply in the metropolitan area has not been released much, leading to numerous inquiries about transaction rights in Uiwang, which is close to Seoul. If there had been newly built complexes with pre-sales before June 30, it seems that there would have been a surge in latecomers trying to take advantage of that.'
Experts explained that due to high prices for transaction rights in Seoul and decreased demand for transaction rights in rural areas, transactions are concentrated in the Gyeonggi region. Professor Ko Jun-seok of Yonsei University's Sagnam Business School said, 'People looking to buy houses in the Gyeonggi region are more affected by the reduction in loan amounts when phase 3 of the stress DSR is applied than in Seoul, where prices are significantly higher. In particular, there is likely to be demand for transaction rights in areas with good accessibility to Seoul, where there is potential for price increases.'
Professor Seo Jin-hyung of Kwandong University's Real Estate Law Department said, 'Typically, when interest rates decrease, demand for apartment purchases increases, but when the application of phase 3 stress DSR begins, even if interest rates drop, a situation may arise where people want to borrow but cannot.' He added, 'This is why demand for loans that can avoid the application of the stress DSR has increased.'