A, in their 30s and living in Incheon, looked into an apartment in Seoul's Gangseo District near the workplace to match the timing of the child's school enrollment, but put the moving plan on hold after the Oct. 15 policy announcement. That is because buying a home has become difficult as all of Seoul and 12 areas in Gyeonggi Province were designated as regulated areas and land transaction permit zones.
A planned to sell the apartment currently owned and add about 500 million won in loans to buy an apartment in Gangseo District priced in the 1.1 billion won range. A met both the debt service ratio (DSR) regulation and the maximum loan limit of 600 million won but was caught by the loan-to-value (LTV) regulation. As the LTV was cut to 40%, the amount that could be borrowed from the bank fell to the mid-400 million won range.
A said, "I don't know if it makes sense to move by taking out an unsecured loan or getting help from my parents. For now, I have put the moving plan on hold," adding, "I didn't expect even end users to run into problems because of this real estate policy."
As the government announced the Oct. 15 real estate measures to stabilize the dwellings market, even end users are taking a hit. End users who were planning to move for various reasons such as marriage, children's schooling, or jobs are finding it harder to relocate as loan regulations tightened and designations of regulated areas made borrowing more difficult.
Under the government's Oct. 16 decision to expand regulated areas, starting that day, all 25 districts of Seoul and a total of 12 areas in Gyeonggi Province—▲ Gwacheon ▲ Gwangmyeong ▲ Seongnam's Bundang, Sujeong, and Jungwon districts ▲ Suwon's Yeongtong, Jangan, and Paldal districts ▲ Anyang's Dongan District ▲ Yongin's Suji District ▲ Uiwang ▲ Hanam—were grouped as areas subject to adjustment and overheated speculation districts. In these areas, the regulations of the land transaction permit zone will also take effect starting on the 20th.
The government also cut loan limits based on an apartment's price (market price). If the apartment price is over 1.5 billion won and under 2.5 billion won, the loan limit is 400 million won, and if it exceeds 2.5 billion won, the limit is 200 million won. Apartments not exceeding 1.5 billion won have a maximum loan limit of 600 million won.
With these loan regulations combined with the designation of regulated areas, these regions are now subject to double loan restrictions. When designated as regulated, the LTV ratio is cut from the previous 70% to 40%. In this case, even if an apartment price is 1.5 billion won or less, the 40% LTV cap applies simultaneously, which can reduce the loan limit. For example, when trying to buy a 1 billion won apartment in a regulated area, the maximum loan limit is reduced to 400 million won, not 600 million won.
The government set safeguards to prevent significant harm to end users under the latest measures, but restrictions on end users' residential mobility appear inevitable. For first-time homebuyer loans, the limit will remain 600 million won, and for low-income households without a home, even in regulated areas, if combined spousal annual income is 90 million won or less, an LTV of 60% will apply. Even so, those seeking to live in the property or one-home owners moving with a loan are now facing constraints.
B, in their 40s, who had planned to buy a home in advance to live in after the children finish their education, said, "We're renting in a top school district, and I was going to buy a place in Seoul's Gangdong District in advance with a jeonse tenant after the kids go to college," adding, "They say we just need to buy by the 20th, but I have asset that is hard to turn into cash right away, so I think I'll have to delay buying a home."
In particular, high-earning young adults who cannot use the "parent chance" are likely to be hit hard. C, in the early 30s, postponed plans to buy an apartment in the so-called "Han River belt" area within the year. The couple C, with a combined annual income in the 300 million won range, had planned to use loans to buy a home, but the latest measures have effectively shut the path to purchasing high-priced dwellings through borrowing.
C said, "We are dual-income professionals, so I think we are fully capable of repaying the loan," adding, "With the loan limit reduced by an additional 200 million won, it seems we won't be able to buy a home at the planned time." C continued, "People around us advised us to look for a cheaper home within our budget, so we're thinking it over," and said, "It feels like only the wealthy or those who can use the parent chance are being told to move into good areas, which is dispiriting."
Experts assessed the latest measures as "like spraying fly poison instead of using a fly swatter to catch a fly on the table." Yoo Sun-jong, a professor in the Department of Real Estate at Konkuk University, said, "If there is food or a person that attracted flies while eating, you should remove that, but if you spray poison on the table, no one can eat any of the food," adding, "It may have been difficult to tailor policies to save end users, but this policy applied uniformly and effectively shut down the market itself."
Park Won-gap, a real estate specialist at KB Kookmin Bank, assessed, "The step-by-step 'strategy to secure one's own home' that had been used—gap investing in a higher-tier area and then moving in—has become impossible."
There are calls to design policy with greater precision to make it easier for end users to move. Kim Hyo-seon, chief real estate strategist at NH Nonghyup Bank, said, "It is necessary to apply easing of the debt service ratio (DSR) and LTV for end-user groups such as first-time homebuyers, newlyweds, and households with children," adding, "We need to segment repayment capacity criteria relative to income to maintain the ladder for ordinary people to secure their own homes."
Seo Jin-hyung, a professor in the Department of Real Estate Law at Kwangwoon University, said, "For those without a home or those seeking to trade up, we need policies that exempt them from loan regulations to prevent the market mechanism from breaking down," adding, "If the market is suppressed solely by discouraging purchases, many side effects of the paradox of regulation can emerge. Allowing only the wealthy to move residences can lead to deeper polarization."