As the government establishes strong real estate loan regulations, many experts anticipate that housing prices in the Han River belt areas, including Gangnam, Mapo, Yongsan, and Seongdong in the second half of the year will likely decline and adjust. This implies that the atmosphere of the real estate market, which showed signs of overheating since May, will change significantly from the second half of the year.
However, some experts expressed concerns that a phenomenon of "super polarization" could occur, where the price gap between certain areas such as Gangnam and others widens further. There are also experts predicting a "balloon effect" where the rise in housing prices spreads to outlying areas of Seoul, Gyeonggi, and Incheon.
◇ Forecast of declining house prices in Gangnam’s three districts, Mapo, Yongsan, and Seongdong
Park Won-gap, Chief Real Estate Commissioner at KB Kookmin Bank, said on the 1st, "Housing prices in the second half of the year will be greatly affected by strong real estate loan regulations," adding, "Prices in the Han River belt areas like Gangnam, Mapo, Yongsan, and Seongdong may enter a correction phase." He further noted, "This measure introduced by the government is one of the strongest measures comparable to the full ban on housing loan collateral for properties over 1.5 billion won announced at the end of 2019, meaning that the price increases in the Han River belt cannot continue as they are now."
In December 2019, the government announced the "12-16 Real Estate Measures," strengthening the loan-to-value (LTV) ratio for properties exceeding 900 million won and prohibiting mortgages for properties exceeding 1.5 billion won. The Seoul apartment sales price index rose from 1.29% immediately before the policy announcement to 0.43% after the announcement, reducing the growth rate to one-third. Subsequently, throughout the first half of 2020, the average monthly increase in Seoul apartment prices remained at 0.09%. This situation could recur in the second half of this year.
Yang Ji-young, a specialist at Shinhan Premier Pathfinder, noted, "Areas like Mapo, Dongjak, and Gangdong, which saw a high influx of individuals with high incomes who purchased homes based on combined income and dwelling loans, will be most affected in terms of demand and prices in the second half." Kim Hyo-sun, Chief Real Estate Commissioner at NH Nonghyup Bank, stated, "Due to the loan regulation policy, the direction of the overheated housing market, which is experiencing supply shortages in the metropolitan area, will change," adding that it is a clear signal from the government to block indications of real estate overheating.
The regulation limiting loans at 600 million won is expected to have the most significant impact on housing prices in the second half, particularly reducing loan amounts in areas like Gangnam and Mapo. According to an investigation by Real Estate R114, the average market price for apartments in Seoul is around 1.46 billion won. Applying an LTV of 70% in non-regulated areas and 50% in regulated areas including the three districts of Gangnam and Yongsan, estimates reflecting average apartment prices by autonomous districts show that the reduction in loans for Seocho District is 997.64 million won, the largest among 25 autonomous districts in Seoul. Furthermore, reductions in loan amounts of 300 million to 900 million won are also observed in Gangnam District (926.34 million won), Yongsan District (567.87 million won), Seongdong District (547.83 million won), Songpa District (486.84 million won), Mapo District (438.96 million won), Gangdong District (326.85 million won), and Dongjak District (321.50 million won).
◇ Possibility of "super polarization" and "balloon effect" in housing prices
There are prospects for deepening super polarization in housing prices and for balloon effects to occur.
Seo Jin-hyung, a professor at Kwangwoon University specializing in real estate law, stated, "As we move into the second half of this year, super polarization in housing prices will progress," adding, "Polarization between Seoul, local areas, and within Seoul will intensify." Specialist Yang Ji-young also mentioned, "With strong regulations introduced by the government right after it took office, a fearful atmosphere is forming in the market, as there might be more regulations in the future, leading to long-term super polarization. He commented, "Especially in the three districts of Gangnam, purchasing a house has required a certain amount of cash, regardless of high income, and this trend will likely deepen going forward."
According to KB Kookmin Bank, the quintile ratio representing the price difference between the top 20% of apartments (5th quintile) and the bottom 20% (1st quintile) across the country this month has been surveyed at 11.9 times. This is the highest since statistics were first compiled in December 2008. The average transaction price of the top 20% of apartments in Seoul surpassed 3.14 billion won for the first time, standing at 3.14419 billion won, while the average price of the bottom 20% of apartments is 490.85 million won.
There are also opinions that apartment prices forming in the 600 million won to 1 billion won range may rise due to the balloon effect. Kim Hak-ryeol, head of Smart Tube Real Estate Research Institute, noted, "A balloon effect will naturally occur due to loan regulations in the second half," predicting that housing prices in outlying areas of Seoul, Gyeonggi, and Incheon, where mid-low prices are formed compared to the Seoul average, will rise. He added that demand for apartments in Seoul priced around 800 million to 1 billion won and those in Gyeonggi and Incheon ranged around 700 million to 800 million won will increase as a result of the balloon effect.
Ham Young-jin, head of real estate research at Woori Bank, also commented that there is a possibility of a balloon effect occurring in outlying areas of Seoul, such as Nowon, Dobong, Gangbuk, Geumcheon, Gwanak, and Guro, where purchases can be made in the range of 600 million to 800 million won.