Land Transaction Permit System Fades... Intensifying Battle to Buy 'Smart One House'

"Gangnam is not the problem right now. With the Land Transaction Permit System, house prices in other areas keep rising, and they say they will reduce loans even more. I don't know when they expect us to buy a house. I need to quickly look into financing."(Seoul Nowon-gu·35 years old·male)

With the implementation of the 3rd stage stress DSR (Debt Service Ratio) approaching in July, the housing purchase sentiment in Seoul is rapidly rising. After the re-designation of the Land Transaction Permit Area in Seoul, house prices are rising, especially in prime apartment areas, and the government's continued tightening of loan regulations is believed to be stimulating buyers' sentiment.

According to the weekly national apartment market trends by KB Real Estate on the 26th, the Purchase Dominance Index in Seoul for the 3rd week of May (as of May 19) was 63.1, up 3.5p from the previous week (59.6).

The index is still below 100, indicating more sellers in the market, but it has been rising for five consecutive weeks since rebounding to 53 in the 3rd week of April (as of the 21st). This upward trend is analyzed to be due to buyers moving in anticipation of the DSR strengthening.

When the 3rd stage stress DSR is implemented, an additional interest rate of 1.5% will be applied to the existing loan interest rate, reducing the loan limit and increasing financial pressure.

During the same period, the Purchase Dominance Index in 11 districts of Gangnam was 73.7, up 7.2p from the previous week (66.5). The index had shown a downward trend after recording 81.1 and 78.7 in the 2nd and 3rd weeks of March (as of the 10th and 17th, respectively) during the Land Transaction Permit Area release period, but rebounded to 61 in the 4th week of April (as of the 28th) and has recovered to the March level in a month.

At the same time, apartment prices in Seoul are showing a strong upward trend, centered on prime areas like Gangnam. According to KB Real Estate, the apartment sales price in Seoul for the 3rd week of May rose by 0.17%, continuing an upward trend for 17 consecutive weeks since the 3rd week of January (as of the 20th).

Especially, despite the re-designation of the Land Transaction Permit Area, record high transactions are occurring in luxury apartment complexes centered on the three Gangnam districts, pushing up market prices. The Hyosung Villa Cheongdam 101 located in Cheongdam-dong, Gangnam-gu, was traded at 11.3 billion won for 226㎡ on the 1st of this month, and the Tower Palace Phase 1 at 8.2 billion won for 244㎡ on the 7th, both setting new records. On the 17th, a 68㎡ unit in Seocho Sinbanpo Phase 2 was traded at 3.5 billion won, setting a new high.

Park Won-gap, Senior Real Estate Specialist at KB Kookmin Bank, pointed out, "As the fear among buyers grows due to the Land Transaction Permit System and loan regulations, the market is becoming more distorted contrary to the government's intentions," adding, "The phenomenon of apartment preference, intertwined with the trend of upgrading to better areas or buying a smart one house, is also a big issue."


Jang In-seo Reporter