With the government limiting maturity extensions on apartment collateral loans for multiple-home owners and rental business operators as part of its household debt management plan, attention is focused on whether the measure can stabilize home prices. President Lee Jae-myung also called maturity extensions for multiple-home owners and rental business operators a "benefit," saying it is unfair, and expected that removing such benefits would increase housing listings and help stabilize prices. However, most experts predict the latest household debt management plan will not significantly affect the real estate market.
◇ Impacted group "limited"
The main reason this measure is not expected to have a major market impact is the current structure of apartment collateral loans. The government said it will, in principle, disallow maturity extensions on apartment collateral loans in the Seoul metropolitan area and regulated zones held by individuals owning two or more dwellings and by rental business operators (individuals and corporations). After the June 27 measures last year banned new loans for multiple-home owners and the Sept. 7 measures blocked new loans for rental business operators, the government now plans to restrict even maturity extensions.
However, most current apartment mortgage loans have already been converted, under the financial authorities' household debt management plan, to long-term principal-and-interest amortizing structures with maturities of up to 20–30 years. A representative case is the "安心전환대출" (safe conversion loan) launched by 16 commercial banks in 2015. Led by Vice Chair Kwon Dae-young of the Financial Services Commission (FSC) when Kwon was head of financial policy, this policy loan product converted existing variable-rate, bullet-repayment mortgages into long-term fixed-rate, amortizing loans. Borrowers could choose maturities up to 30 years, and the 20 trillion won limits in both the first and second rounds were quickly exhausted due to strong demand. After its initial launch in 2015, the safe conversion loan was relaunched in 2019 in a version for low- and middle-income borrowers. While the low- and middle-income product limited eligibility to one-home households and imposed a combined spousal income cap, the 2015 product allowed multiple-home owners and had no income limit. Even now, most newly originated mortgage loans are issued with fixed rates for at least five years and in long-term principal-and-interest partitioning formats.
Lee Joo-hyun, a senior expert at GGAuction, said, "There are many loans set with 30-year maturities, so there won't be that many dwellings affected by the maturity extension regulation." Ham Young-jin, head of the real estate research lab at Woori Bank, explained, "When rental business operators take out loans such as facility repair funds (working capital) with apartments as collateral, some do so with bullet maturities of several years, and those loans will be affected." Still, many in the industry say the effectiveness of the measure will be limited because many apartment collateral loans are already under long-term contracts of 20–30 years or more.
◇ Gangnam, Mapo, Yongsan and Seongdong have little to no loans
Regions that serve as benchmarks for home prices, such as Gangnam, Mapo, Yongsan and Seongdong, also fall outside the effective reach of this household debt management plan. That is because the loan-to-value share is low relative to overall home prices, and even if maturities are not extended, these areas can switch to tenant funds such as high-price jeonse. According to KB Real Estate, in September last year the average apartment sale price across 11 districts south of the Han River in Seoul reached 1.80677 billion won, topping 1.8 billion won for the first time since statistics began. In the three Gangnam districts, the average sale price for 59 square meters of exclusive space also exceeded 2 billion won. In the Oct. 15 measures last year, the government limited the mortgage loan cap to 200 million won for dwellings priced over 2.5 billion won in the Seoul metropolitan area and regulated zones. This suggests it will be difficult for a ban on maturity extensions to produce policy effects.
However, registered rental dwellings held by existing rental business operators could be affected. The rental business operator system introduced by the government in 2004 granted tax benefits if operators maintained mandatory lease terms of up to 10 years and observed a rent cap (5% per year). Although the rental business operator system for apartments was abolished in 2020, some apartment rental business operators registered earlier have not yet been deregistered. Because the registration standard for rental dwellings was "official appraisal price of 600 million won or less," the market analyzes that these are concentrated in the outskirts of Seoul and in mid- to low-priced apartments.
Kim Hak-ryeol, head of the Smart Tube Real Estate Research Institute, said, "High-priced dwellings have little to no loans, and even when there are loans, many are in popular areas where tenants will move in even with more expensive jeonse, so the policy will have no effect." Kim added, "Instead, dwellings in the outskirts of Seoul and in Gyeonggi Province—purchased by taking both tenants' deposits and bank loans, whether with jeonse or by collecting monthly rent—will be affected by the ban on maturity extensions, leading them to come onto the market or go to auction, increasing hardships for low- and middle-income residents."