Seoul Home Loan Reliance Drops to 6-Year Low Amidst Regulations
Seoul homebuyers are increasingly relying on cash purchases as stricter lending regulations and high interest rates dampen the appeal of mortgage financing, according to data released Wednesday. The proportion of home purchases in Seoul financed by mortgages fell to 42.96% in January, the lowest level in six years and one month, according to the Supreme Court Registry Information.
The decline reflects a broader shift in the market, with buyers possessing greater financial resources becoming more dominant. This trend is attributed to government measures aimed at cooling the housing market by tightening lending criteria and maintaining elevated interest rates. The ratio peaked at 60.41% in July 2022, when mortgage-fueled demand was at its highest.
The impact of these regulations is particularly evident in Seoul’s affluent Gangnam district, where the mortgage financing ratio dropped to a record low of 29.55% last month. Similar declines were observed in neighboring Seocho (down to 31.43%) and Songpa (down to 32.27%) districts. Areas along the Han River, including Mapo (39.81%), Gangdong (41.73%) and Yangcheon (42.13%) also saw decreases in mortgage reliance.
Recent data indicates that Seoul home prices have been on the rise for two consecutive months, with a 0.91% increase in January, according to the Korea Real Estate Board. This increase follows a 0.80% rise in December, reversing a previous slowdown attributed to the “10·15” housing policy implemented last year. Specifically, Songpa district experienced a significant 1.56% increase in property values, driven by large-scale apartment complexes, while other areas like Dongjak (1.45%) and Gangdong (1.35%) also saw substantial gains.
The shift towards cash purchases comes amid concerns raised by President Yoon Suk Yeol regarding speculative real estate investment. Recent reports suggest a 4% increase in apartment listings in Seoul during the Lunar New Year holiday, potentially in anticipation of stricter regulations on multi-homeowners’ capital gains taxes. While, the overall impact of these potential regulations remains to be seen.
The Korea Housing Finance Corporation reported a decline in the composite interest rate for new home loans to 2.77% in January, a decrease of 0.12 percentage points and the first decline in five months. This may offer some relief to potential borrowers, but the overall trend suggests a market increasingly driven by those with available capital.