As lending regulations are applied across the metropolitan area, the real estate market in outer metropolitan areas such as Pyeongtaek and Icheon, which are designated as unsold management regions, is also freezing. The lending regulations aimed at curbing the soaring housing prices in certain areas such as Seoul, Gwacheon, and Seongnam Bundang are applied uniformly across the metropolitan area, increasing the possibility of delays in resolving unsold properties in these areas.
According to the real estate industry and the Korea Housing & Urban Guarantee Corporation (HUG) on the 6th, Pyeongtaek and Icheon are areas where the lending regulations announced by the government on the 27th of last month are applied.
The government has implemented measures targeting the metropolitan area and regulated regions, including ▲prohibition of loans for multiple homeowners ▲limiting housing mortgage loans to 600 million won ▲limiting housing mortgage loans (1 million won) for living stabilization funds ▲restricting the maturity of housing mortgage loans to within 30 years ▲reducing the loan-to-value ratio (LTV) by 10 percentage points for first-time homebuyers ▲requiring residency within six months upon executing housing mortgage loans ▲prohibiting leasehold loans conditioned on transfer of ownership.
This lending regulation was implemented to control the soaring housing prices in some areas of Seoul and Gyeonggi Province, and it included the entire metropolitan area to prevent a balloon effect. As a result, regions like Pyeongtaek and Icheon, where the unsold property issue is serious, also had to comply with the regulations, failing to reflect local conditions.
Pyeongtaek and Icheon are designated as unsold management areas selected by HUG in June. Pyeongtaek has been designated as an unsold management area since March, while Icheon has been since August of last year. HUG designates unsold management areas among cities and counties where the number of unsold units exceeds 1,000 and the number of unsold units exceeds 2% of the total stock of multi-family dwellings, selecting areas that meet at least one of the following criteria: ▲increase in unsold units ▲poor resolution of unsold units ▲concerns over unsold units.
In the case of Pyeongtaek, the condition of poor resolution of unsold units was met, while in Icheon, both conditions of poor resolution and concern over unsold units were satisfied, leading to their selection as unsold management regions. The number of unsold dwellings in Pyeongtaek was 4,442 as of May, while Icheon had 1,479. 48.7% of unsold dwellings in Gyeonggi Province are concentrated in these two cities.
Pyeongtaek and Icheon are also experiencing significant declines in apartment sales prices. According to the Korea Real Estate Board (REB), the cumulative change rate of sales prices in Pyeongtaek for the fifth week of June this year was recorded at -3.91%. This is the largest decrease in sales prices across the metropolitan area, surpassing even Gyeonggi Province, Seoul, and Incheon. Icheon also reported a cumulative change rate of -2.51%, making it the third-largest decline in prices among the metropolitan areas, following Ansung (-2.73%).
In this situation, with the lending regulations applied, forecasts indicate that the timing for resolving unsold properties in areas such as Pyeongtaek and Icheon will be further delayed. As over 30,000 housing units are scheduled to be occupied by 2027, the implementation of lending regulations has made it more difficult to secure funding for sales compared to before. Due to this regulation, it is expected to be challenging for Pyeongtaek and Icheon to pay for sales using lease funds that involve loans, and the LTV for first-time homebuyers will decrease by 10 percentage points to 70%. The prohibition of loans for multiple homeowners is also likely to reduce demand for purchasing apartments to rent them out.
Kim Hyo-sun, a real estate specialist at NH Nonghyup Bank, said, "The purchase amount of dwellings in this area is not affected by the lending regulations. However, the very nature of the regulations can have a psychological impact. Even if loans were to become smooth, the demand has been insufficient, leading to prolonged unsold conditions, and since it is expected that supply will increase in the future, I feel that this regulation will not have a positive effect, making the unsold property issue more difficult."
Ham Yeong-jin, head of the Real Estate Research Lab at Woori Bank, noted, "Regions with a large volume of housing units have little waiting demand for sales. Areas like Pyeongtaek and Icheon, where unsold properties exist, face substantial burdens related to supply backlogs, making it inevitable that the pace of resolving unsold properties will be slow." He added, "It seems unavoidable that sales prices and transaction demand will be depressed."
In particular, Pyeongtaek and Icheon are mentioned as places where it is difficult to receive government support for resolving unsold properties, further complicating the issue. The Korea Land & Housing Corporation (LH) is also targeting unsold dwellings in provincial areas through its project for purchasing unsold dwellings and restructuring real estate investment corporations (CR REITs) that purchase and operate unsold dwellings and then sell them for revenue.
Some argue that this lending regulation could lead to a balloon effect, allowing the market in regions like Pyeongtaek and Icheon to rise. However, real estate experts view such an increase as likely to be limited.
Kim, the expert, emphasized, "The current real estate market is not one where purchases are made just because conditions for loans are met. There is significant demand for selectively purchasing safe properties, so even if a balloon effect occurs, there will likely be regional restrictions."
In the market, there are also suggestions that the lending regulation should have been more refined, as the atmosphere of the market varies widely by region within the metropolitan area. A real estate market expert stated, "To contain the balloon effect and curb the rising housing prices in Seoul and some areas of the metropolitan area, regulations on the entire metropolitan area might have been necessary, but applying blanket regulations could impact the seriously stagnating outer metropolitan areas, so I believe more careful measures were needed."