"They say additional real estate measures will come out this week, so I moved up a contract that was supposed to settle at year-end and paid the balance in full this week."
The head of a real estate agency in Yangcheon District, Seoul, said ahead of the government's announcement of additional real estate measures that "those who were going to buy a house moved early." As the government signaled it would announce measures this week to stabilize the dwellings market, demand to bring apartment transactions forward is rising. After the government made a surprise announcement of the June 27 loan regulations in June, which capped the Seoul metropolitan area home mortgage loan limit at 600 million won, people who experienced funding disruptions are increasing the number of cases of moving up contracts in advance.
According to the Ministry of Land, Infrastructure and Transport on the 14th, the government plans to announce additional measures this week to stabilize the dwellings market. Minister Kim Yun-duk of the ministry said at a National Assembly Land Infrastructure and Transport Committee audit held the previous day that "we are aiming to announce this week" regarding the timing of the real estate measures.
As the government's additional measures became certain, the market is sharing tip sheets that anticipate the government's steps and is on high alert over the level of regulation.
In the market, there is an outlook that the regulated areas currently limited to the three Gangnam districts of Seoul (Gangnam, Seocho, Songpa) and Yongsan District will be expanded to the Hangang Belt areas such as Mapo, Seongdong, and Gwangjin districts, as well as Bundang District in Seongnam, Gyeonggi Province, and Gwacheon. There is also a possibility that all of Seoul will become a regulated area. If designated as a speculative overheat district or an adjusted area, which are regulated areas, tax burdens such as higher acquisition and holding taxes for multiple-home owners and higher capital gains taxes will increase, and the loan-to-value (LTV) ratio for home mortgages will drop from the current 70% to 40%. First-priority eligibility requirements for subscriptions will also be tightened, and sales-right resales will be restricted.
There are also market views that loan regulations will be tightened so that the existing loan limit could be reduced from up to 600 million won to 400 million won, or the debt service ratio (DSR) could be cut from the current 40% to 35%.
With the situation as it is, demand to conduct a transaction before tighter rules increased starting in September, ahead of the Chuseok holiday. Those seeking to buy dwellings hurried to sign contracts or moved up balances that had been scheduled for year-end. Some even set balance dates for early next year, when banks would have more headroom in their total lending, and signed contracts.
An official at a real estate agency in Mapo District, Seoul, said, "There were quite a few cases around Chuseok of people from the provinces signing contracts without even seeing the house," and added, "If an area is designated as a regulated area, funding plans can be disrupted, or if it is designated as a land transaction permit zone, an owner-occupancy requirement may arise, so there were quite a few cases of rushing to sign contracts."
There were reportedly many inquiries about the retroactive application of regulations, mainly from buyers who had paid only the deposit. A person in their 30s, identified as A, who bought an apartment in Gangseo District and is scheduled to pay the balance in December, said, "I've paid up to the interim payment, but I'm worried the bank loan might be blocked," and added, "Even if the government says there is no retroactive application, if the bank says it's difficult, I'm thinking about how to prepare the balance." The person added, "I'm also thinking about owner-occupancy. I was planning to move in for owner-occupancy after the middle of next year, but if it becomes a regulated area or a land permit zone, I'll need to find out whether the owner-occupancy requirement is based on the contract date or the registration date."
A real estate agency official said, "As word spread that regulations will be tightened, there is strong interest in retroactive application," and added, "Because of what we experienced during the June 27 loan regulations, there are also people who want to sign contracts before lending thresholds rise to match their existing funding plans. Everyone knows the regulations will be announced, so there are many inquiries about when the application will start."
Sellers who expected home prices to rise after the regulations pulled their listings, while others who expected the dwellings market to enter a wait-and-see mode for a while after the regulations put up quick-sale listings. One apartment sales-right ad said, "If the balance is quick, the premium is negotiable. If it is tied up as a regulated area, listings for sale will almost disappear. For those planning to buy, today could be the last chance."
Some demand from multiple-home owners also appeared to pause. Because purchasing additional dwellings in areas likely to be tied up as regulated areas carries disadvantages such as taxes, there were reportedly buyers who said they would decide on investments after watching the market trend following the announcement of the regulations.