Eunpyeong-gu tops Seoul loan index as rate hikes loom for young buyers

Eunpyeong-gu, a district that has seen a surge of buyers in their 20s and 30s, posted the highest loan index among Seoul districts last month — just as the Bank of Korea raised its benchmark interest rate by 0.25 percentage points to 2.75%. In Gyeonggi Province, Dongtan-gu in Hwaseong led all districts. The data point to a pattern in which interest-payment burdens are falling most heavily on young buyers in Seoul's outer neighborhoods.

According to the Supreme Court Registry Information Plaza's loan index for collective residential buildings — a category covering apartments, row houses, multi-family homes and officetels — Eunpyeong-gu recorded an average index of 60.17 in July, the highest in Seoul. The index measures the ratio of mortgage collateral registered against a property relative to its transaction price. For a 1 billion won ($718,000) apartment with a loan index of 60, the mortgage collateral registered against that unit amounts to 600 million won.

Eunpyeong-gu has become a focal point for buyers in their 20s and 30s. A survey of Supreme Court Registry Information Plaza data by real estate platform Zigbang found that purchases of collective buildings by buyers in their 20s in Eunpyeong-gu rose from 765 in June to 887 in July, lifting their share of total transactions from 10.6 percent to 11.8 percent. Buyers in their 30s also increased, from 3,979 to 4,300, pushing their share from 55.2 percent to 57 percent. Taken together, two out of every three first-time buyers of collective buildings in the district were in their 20s or 30s.

Geumcheon-gu came in just behind with an index of 60.12, meaning debt accounts for more than 60 percent of property values there as well. Nowon-gu (57.75), Dobong-gu (57.32) and Guro-gu (57.18) followed in that order, confirming that loan ratios rise the further a district sits from central Seoul.

Districts dominated by high-priced apartments recorded far lower indices. Gangnam averaged 32.54, followed by Songpa-gu (36.02), Seongdong-gu (36.42) and Seocho-gu (36.66). The lower readings reflect overlapping regulations: while average apartment prices in those areas exceed 3 billion won, properties priced at 2.5 billion won or more are subject to a lending cap of just 200 million won.

In Gyeonggi Province, Dongtan-gu in Hwaseong — whose property prices had climbed on the back of the so-called semiconductor belt effect — posted the highest loan index among regulated zones and land transaction permit areas at 61.64. Ansan's Dongan-gu (61.27) and Yongin's Giheung-gu (60.22) also exceeded 60, surpassing even Eunpyeong-gu. All three areas have seen property prices rise amid strong demand from first-time buyers.

Dongtan's index had reached as high as 71.55 as recently as May, meaning debt accounted for more than 70 percent of property values. It edged down after the district was designated a land transaction permit area — imposing an owner-occupancy requirement from Jan. 1 — and a regulated zone restricting lending, but the index remains above 60.

The concern now is that the Bank of Korea, having raised its benchmark interest rate from 2.5 percent to 2.75 percent last month, has signaled further increases, which could deepen the principal-and-interest repayment burden. Analysts warn that the sharpest impact of rate hikes could hit Seoul's outer districts first.

Reflecting the tightening cycle, the new-loan COFIX rate — the benchmark for bank mortgage rates — rose 0.13 percentage points in July to 3.18 percent, its highest level in one year and seven months.

"Outer Seoul neighborhoods and nearby parts of Gyeonggi Province, where relatively affordable apartments are concentrated, have consistently attracted genuine demand from younger buyers because of their price accessibility and easier access to financing," an industry official said. "As the number of young people and newlyweds who have stretched their borrowing to the limit has surged, any increase in principal-and-interest payments will force them to devote most of their income to debt repayment — and that could trigger a significant pullback in consumer spending."

hss@heraldcorp.com