The government will implement a loan regulation prohibiting loans for dwellings worth more than 600 million won starting on the 28th, leading to an expected decline in loan amounts for about 74% of apartments in Seoul. It has also been analyzed that to purchase an apartment in Seoul, one would need to have at least 860 million won in cash, as the average loan amount is expected to decrease by more than 400 million won compared to before.
Based on the analysis of average apartment prices in the metropolitan area by Real Estate R114 on the 29th, it is expected that loan amounts will decrease in 18 out of the 25 districts in Seoul, as the credit limit for residential mortgage loans has been capped at 600 million won.
In the case of the 18 districts, in non-regulated areas, the loan-to-value (LTV) ratio is 70%, while in the regulated areas of Gangnam's three districts and Yongsan, an LTV of 50% allows for loans of over 600 million won based on the borrower's income. However, with this new regulation, the loan amount is limited to 600 million won. A total of 1,276,257 households (excluding rental apartments) are affected. This accounts for about 74% of the total stock of apartments in Seoul, which is approximately 1,717,384 apartments, excluding rental apartments.
Considering that the average apartment price in Seoul, as surveyed by Real Estate R114, is around 1.46 billion won, assuming an LTV of 70%, loans of up to 1.02 billion won were possible previously. However, due to the new 600 million won credit limit, the amount available for loans will decrease on average by 420 million won, meaning individuals will need to have more than 860 million won of their own funds to purchase an apartment.
In Seocho and Gangnam, where the average prices exceed 3 billion won, being regulated means that even with an LTV of 50%, loans of over 1.5 billion won were possible until now. However, in the future, only loans of up to 600 million won will be available, requiring significantly more cash of around 2.5 billion to 2.6 billion won to purchase in Gangnam.
In the regulated areas of Yongsan and Songpa, the average prices are 2.33 billion won and 2.17 billion won respectively, where previously loans of more than 1 billion won were possible. Currently, however, loan amounts will decrease by over 400 million won, resulting in the need for cash of 1.6 billion to 1.7 billion won to move in.
In districts like Gwangjin, Yangcheon, and Yeongdeungpo, where the average prices range from 1.4 billion to 1.5 billion won, individuals will need to have 800 million to 900 million won in hand to purchase, excluding the maximum loan amount. Based on current prices, the areas where loans can be obtained under the 600 million won limit and receive an LTV of up to 70% are limited to just seven districts, including Nowon, Dobong, Gangbuk, Geumcheon, Gwanak, Guro, and Jungnang, where the average apartment prices are between 600 million to 800 million won.
Yun Ji-hae, head of the research lab at Real Estate R114, noted, "Due to the loan regulations, a short-term decrease in demand is expected; however, demand might shift from high-value housing areas to mid-low price regions, potentially causing a balloon effect," and added that "in regions outside of land transaction permission zones in Seoul, instances of circumventing regulations through leasing will likely increase."