The government has announced a strong demand suppression policy through loan restrictions, indicating that the real estate market in the Seoul metropolitan area is expected to enter a correction phase. In particular, with the loan limit set at 600 million won and the obligation of actual residence imposed in the metropolitan area, it is anticipated that the phenomenon of 'panic buying' will subside, especially in the 'Han River Belt'.
The market reacted with confusion, noting that "stronger measures than expected have emerged," and commenting that "the entire metropolitan area is now treated as a regulated zone."
On the 27th, the Financial Services Commission, the Ministry of Economy and Finance, and the Ministry of Land, Infrastructure and Transport held an 'Emergency Household Debt Review Meeting' and announced that they would strengthen household debt management in the metropolitan area.
The main points include ▲Restriction on housing loans (mortgage loans) for multiple homeowners ▲Reduction of mortgage loan maturities to within 30 years in the metropolitan area and regulated zones ▲Limitation of mortgage loan credit limit for purchasing dwellings to 600 million won ▲Imposition of an obligation to move in within six months when executing mortgage loans in the metropolitan area and regulated zones. The regulated zones include speculative and overheated areas, as well as designated adjustment areas, currently only encompassing Gangnam, Seocho, Songpa, and Yongsan districts.
◇The overheating in the 'Han River Belt' is expected to calm down… little impact on provinces
According to the current household debt management measures, it is expected that the overheating real estate market in Seoul and the metropolitan area will stabilize. In particular, predictions suggest that the overheating in the three districts of Gangnam (Seocho, Gangnam, and Songpa) and the 'Han River Belt', including Mapo, Yongsan, and Seongdong, will calm down. This is because only those with cash will be able to enter the Han River Belt, as the maximum mortgage loan limit is restricted to 600 million won.
Lee Chang-moo, a professor at Hanyang University, said, "While there has been strong demand for trading up to a single good dwelling, this aspect is likely to stabilize somewhat."
Park Won-gap, a senior commissioner at KB Kookmin Bank, noted, "Overall, the previously overheated apartment market in Gangnam is expected to enter a correction phase due to strong loan regulations," and added, "The higher the price of a house, the more sensitive the loan is when buying a home with a large loan. He further remarked, "It is a huge misunderstanding that only cash-rich individuals can buy Gangnam apartments, as many loans are utilized," and anticipated that the price would be significantly affected, particularly in the rapidly rising apartment prices in Gangnam and along the Han River due to trading up to a single good dwelling.
Ham Young-jin, head of the real estate research lab at Woori Bank, stated, "Considering the recent average price per apartment along the Han River, excluding the maximum loan limit of 600 million won, one must have between 900 million and 1 billion won in cash to enter," and noted that the price surge caused by the phenomenon of real estate "FOMO (fear of missing out)" could stabilize.
In suburban areas or the Gyeonggi Province, where mid-priced apartments are concentrated, it is expected that the impact will be less severe compared to the Han River Belt. Commissioner Park noted, "Suburban areas or the metropolitan area will likely be less affected than the core areas of Seoul," but explained that "the six-month mandatory residence regulation will not significantly yield reflexive benefits."
As the three districts of Gangnam and the Mapo-Yongsan areas transition into a correction phase, there are concerns about a balloon effect occurring in some regions. The head of the research lab forecasted, "The balloon effect could arise in mid-priced apartment concentration areas where transaction amounts range from 500 million won to 800 million won."
In regions outside of Seoul, it has been observed that the current loan regulation exceptions will likely mean they will not be significantly impacted.
◇"Only cash-rich individuals can buy homes"... Criticism of 'kicking away the ladder'
Following the announcement of this regulation, the market has reacted by suggesting that even if no additional regulated zones are designated, "the entire metropolitan area is essentially treated as a regulated zone." A real estate expert stated, "It is the first time I have seen a restriction on loan limits based solely on amount, regardless of collateral value or repayment ability," and added, "It is expected that transactions will cease for the time being due to strong regulations."
Concerns have also been raised that this measure will exacerbate the 'polarization phenomenon.' While numerous regulations have focused on multiple homeowners, recent market trends have centered around those with one home trading up, leading to criticisms that this could represent a form of 'kicking away the ladder.' An anonymous expert commented, "Given that trading up to higher-priced properties was a trend this year, this regulation could be seen as a form of kicking away the ladder for those with one home."
There are expectations that confusion regarding settlement procedures will arise. This is because the ban on conditional transfer-lease mortgages in regulated areas and the metropolitan area will make it difficult to secure loans for gap investments. The conditional transfer-lease mortgage is used by homebuyers (or pre-purchasers) to pay the purchase price or deposit with the lease deposit.
Another real estate expert indicated that "there could be confusion in areas where the balance payment on the settlement must be made as conditional transfer-lease mortgages are prohibited," and added, "With the need to lower rents or find landlords with financial capacity, confusion in settlement procedures is expected."
◇The government will consider additional regulations if house prices do not stabilize
The government has stated that it will review additional regulations if house prices do not stabilize. The most likely measure is to expand the current designated speculation and overheated zones, which are limited to the three districts of Gangnam and Yongsan, to include other areas where house prices have recently surged, such as Mapo and Seongdong districts, and to areas including Gangdong, Dongjak, Gwangjin, Yeongdeungpo, and Yangcheon districts outside of Gangnam, which may also be designated as regulated areas.
A government official stated, "We plan to closely monitor the movements in the housing market with heightened vigilance and mobilize all available means to stabilize the market," adding that "if necessary, we will actively seek measures such as additional designations of regulated areas to stabilize the market."