On the 30th, property information is posted in front of a real estate agency in Seoul. /Courtesy of Yonhap News Agency

As the lending regulations have been tightened to cool the overheated housing market, the sale market is also being affected. Prospective buyers nearing the move-in date had problems with their plans to secure the down payment by using a conditional lease loan, which has now been prohibited. Those planning to purchase apartments before the move-in announcement also found themselves needing to reevaluate their financing plans due to the limit of 600 million won on completion loans.

According to the real estate industry on the 30th, problems are arising in the financing plans of prospective buyers nearing their move-in date due to the government's ban on conditional lease loans related to ownership transfer, which was announced on the 27th as part of measures to strengthen household debt management.

Conditional lease loans for ownership transfer are loans used by housing buyers to pay for the purchase price or completion payment using the lease deposit. In simpler terms, when buyers want to complete the payment for the apartment they have purchased with a lease, the deposit of the tenant who received the lease loan is not usable. To pay the balance with the lease deposit, they must find tenants who can pay the deposit in cash without a loan.

Immediate complexes like 'Raemian One Perla' and 'Maple Jay', 'Jamsil Raemian I-Park' in Songpa District, 'Cheongdam Rue' in Gangnam District, and 'Othier Fore' in Seongdong District are now in a situation where conditional lease loans are blocked before their move-in dates.

Prospective buyers who intended to use a lease to pay the remaining balance have rushed to revise their financing plans. They are reportedly shifting their plans to fully pay the purchase price using completion loans first and then finding tenants. This is because complexes that had move-in announcements before the deadline for the loan regulations on the 28th can execute both interim and completion loans totaling more than 600 million won.

On the 29th, the appearance of an apartment complex in downtown Seoul. /Courtesy of Yonhap News Agency

One prospective buyer of an apartment about to be occupied said, "I was planning to lease out the apartment I purchased right away and use that deposit to pay the remaining balance, but I received word from the brokerage that it would be difficult to find tenants without a loan." They added, "I’m currently looking into loan options after being advised to pay the remaining balance using a completion loan first before finding tenants."

For example, a person who purchased an 84㎡ apartment in Raemian One Perla for about 2.3 billion won could solve the remaining payment (20% of the total supply amount) by using the lease and dealing with the remaining purchase price (about 460 million won). Currently, the lease price for this apartment is set between 1.2 billion and 1.3 billion won. Previously, if the debt service ratio (DSR) capacity allowed, it was possible to acquire an apartment using the leasing deposit and loans with just the deposit and part of the interim payment.

However, moving forward, if buyers cannot find tenants who can provide the lease deposit without a loan, they will have to prepare the remaining payment themselves. For Raemian One Perla, since the move-in announcement was made before the implementation of the loan regulations, completion loans of more than 600 million won are possible. However, since the DSR regulation includes collective loans, if the existing loan amounts, such as interim payments, are excessive, even completion loans may be restricted.

Among some buyers, there are opinions expecting a relaxation of the conditional lease loan ban, like in the case of 'Olympic Park Foreon (Dunchon Jugong)'. Banks that had significantly increased household loans during the move-in of Olympic Park Foreon at the end of last year restricted conditional lease loans. However, as the new year began and banks set new total household loan limits, they began to handle conditional lease loans, easing the burden for these apartment buyers.

However, financial authorities dismissed the idea that measures like prohibiting conditional lease loans will be relaxed for Olympic Park Foreon. A financial authority official said, "Places that have announced recruitment for residents are exceptions for collective loans, with housing costs, interim payments, and completion loans being exceptions." The official continued, "However, conditional lease loans are treated as completely separate issues unrelated to the recruitment announcements. You must seek tenants, but find those who do not require loans," explaining, "This loan management plan is being applied across the entire financial sector, so there will be no exceptions like Olympic Park Foreon."

Graphic=Son Min-kyun

The situation at apartment complexes that are about to launch recruitment announcements and commence sales is also expected to change rapidly. This is because the conditional lease loans will not only be prohibited for the apartment complexes slated for sale but also because the maximum loan limit will be restricted to 600 million won. Starting in the latter half of this year to early next year, complexes like 'Raemian Triniwon' and 'Acro de Seocho' in Seocho District, and 'Jamsil Rue' in Songpa District are expected to be subject to this regulation.

If the expected sale price of Jamsil Rue is 2 billion won, it is anticipated that only those with at least 1.4 billion won in cash will be able to move in. Accordingly, prospective buyers who only have the deposit and part of the interim payment are expected to decrease somewhat. However, predictions also suggest that if complexes that are guaranteed profits can sell under the upper limit of sale prices, the competition rates may not drop as much as expected.

Kim Hyo-sun, a real estate expert at NH NongHyup Bank, noted, "There is a high possibility that buyers will be conservative in their applications either by securing a lease to pay the remaining balance or by the restriction on the loan of 600 million won." However, she added, "In regions subject to the housing supply regulations, there will still be a number of buyers choosing new builds in prime locations since profits become immediately visible upon winning."

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