The government has announced a policy to suppress real estate demand through loan restrictions, raising predictions of uncertainty in the rental market in the metropolitan area, including Seoul. In particular, concerns have arisen that the obligation for actual residence throughout the metropolitan area when taking out housing collateral loans could lead to a sharp decrease in available rental properties, resulting in price instability.
On the 27th, the financial authorities announced a loan regulation policy that imposes an obligation to move in within six months when receiving a housing collateral loan for purchasing dwellings in the metropolitan area and regulated areas, so that loans from financial institutions can be used solely for actual residence purposes. This policy regulation also applies equally to policy loans, such as the housing loan.
It also included a ban on conditional transfer loans for dwellings within the metropolitan area and regulated areas to prevent loan funds from being used for gap investment purposes rather than actual residence.
In the market, reactions have emerged that there is a high possibility of additional increases due to the impact of regulations, as the supply of move-in properties in major metropolitan areas has recently decreased, leading to rising prices amid a rental crisis. According to the Korea Real Estate Board (REB), rental prices in Seoul have risen for 19 consecutive months from June 2023 to December last year. Although there was a temporary stabilization in January, prices began to rise again and continued to do so until last month.
As a 'move-in cliff' is predicted due to a significant decrease in the supply of dwellings, concerns about a full-scale rental crisis from the second half of this year have been continuously raised in the market. According to Real Estate R114, the supply of apartments in Seoul next year is expected to be about 24,400 units, which is half the level of this year (46,710 units).
In this situation, if loan regulations are implemented, only actual demanders are likely to utilize housing collateral loans, and it seems that rental properties will not be supplied, except for some multi-homeowners. Experts expressed concerns about the potential for a sharp price increase in the rental market.
Ham Young-jin, head of the Real Estate Research Lab at Woori Bank, noted, 'Overall, the rising trend in rental prices continues this year, and those who rent in Seoul are frequently exercising their renewal rights, making properties scarce,' and added, 'If loan regulations are implemented, the decrease in new properties and gap investment properties will lead to a reduction in rental properties. Fundamentally, the overall decrease in the supply of dwellings in Seoul is also problematic.'
Kim Eun-sun, head of the Data Lab at Zigbang, said, 'This policy aims to allow only purchases centered on actual demanders, which will significantly dampen demand for gap investment methods or purchases made without actual residence,' and warned, 'If this happens, the environment for rental properties will diminish, resulting in potential price increases due to supply shortages. This will create anxiety in the rental market.'
Seo Jin-hyung, a professor of real estate law at Kwangwoon University, stated, 'The supply of rental properties is expected to be insufficient, leading to a surge in prices. If loan regulations are strengthened, there is a possibility that guaranteed monthly rents will increase,' and pointed out, 'The polarization within Seoul is likely to deepen. Loan regulations serve as a strong demand suppression strategy, which may have short-term effects, but in the long run, they could lead to more side effects.'
Concerns were also raised that as demand for purchases declines due to loan regulations, a substantial increase in rental demand will occur. Although demand increases, the supply of properties decreases, leading to an imbalance in supply and demand. Yoon Ji-hae, chief researcher at Real Estate R114, stated, 'If loan regulations are implemented, the purchase demand may shift to rental demand due to the difficulty of obtaining loans. As loans themselves become challenging, the direction of demand is shifting toward the rental market,' adding, 'This could lead to a temporary surplus of demand in the rental market.'
Kim Hyo-sun, senior officer at NH Nonghyup Bank, explained, 'The decrease in buyer demand is expected to lead to an increase in rental demand, causing indirect shocks in the rental market, and an increase in rental demand is anticipated,' and noted, 'The speed of resolving the imbalance in rental supply and demand is likely to slow down, with an acceleration in the conversion to monthly rent.'