Raising interest rates… real estate impact
Maintaining ‘wait-and-see tax’ due to additional tax burden
Next year’s further increase, the main loan interest rate is 6%
In line with the reduction of the loan limit in the financial sector
‘Acceleration’ expected on slowdown in sales growth
As the base interest rate was raised by 0.25 percentage points to 1.0% on the 25th, the era of low interest rates due to COVID-19 is ending, and as the comprehensive real estate tax (special property tax) burden on multi-homeowners increases, housing buying sentiment is expected to remain on the waiting list for the time being. If an additional increase in the base rate is carried out next year, experts predict that the demand for investment in ‘youngcheol’ will decrease significantly as the interest rate on home mortgage loans will enter the 6% range.
Ham Young-jin, head of Big Data Lab, said on the same day, “The interest burden on borrowers receiving home mortgage loans will increase in the future. It will further reduce trading volume.” Park Won-gap, senior real estate expert at KB Kookmin Bank, said, “The increase in the base rate will lead to an increase in domestic market and loan interest rates, which will act as a factor in the contraction of the real estate market. will be,” he explained.
In the case of Mr. A, who received a mortgage loan of 200 million won at 3% per annum, assuming that the 0.25 percentage point increase in the base rate on that day is reflected in the loan rate increase, the interest burden increases by 500,000 won from 6 million won to 6.5 million won per year.
The market is already freezing. According to the real transaction price disclosure system of the Ministry of Land, Infrastructure and Transport, as of the 23rd of last year, the number of apartment sales nationwide decreased significantly from 82,890 in December last year to 43,143 in September this year, 4857 in October and 11,668 in November. did. It is interpreted that the purchase demand decreased as interest rate hikes were expected and financial authorities began to regulate loans.
The trend is the same as the weekly apartment price trend data for the fourth week of November (as of the 22nd) released by the Korea Real Estate Agency on the 25th. Apartment prices in the metropolitan area showed a weekly increase of 0.18%, falling below 0.2% for the first time in about a year. Apartment sales prices in Seoul also declined for five consecutive weeks from the third week of October. The Korea Real Estate Agency explained, “At the time when the general real estate tax was announced on the 22nd, the buying trend declined due to concerns about an additional interest rate hike, etc. did.
In addition, if the regulation on the total debt-to-income ratio (DSR) for each borrower is strengthened from January next year, the rate of increase in the housing market sales price is expected to slow further. In the case of multi-homeowners, it is expected that the demand for additional housing will decrease due to the interest burden and the reduction of the loan limit, and the preference for ‘staying alone’ is expected to accelerate for the time being. Expert member Park Won-gap said, “It is inevitable that demand for profitable real estate, which determines whether to purchase or not based on market interest rates and comparative advantage, will decrease. The impact will be negligible.”
Some observers are predicting that some demand may shift to the jeonse and monthly rental markets as sales decrease due to interest rate hikes. It is also pointed out that homeowners can pass on the increased interest burden to the lessee. Woo Byung-tak, head of the real estate team at Shinhan Bank’s Real Estate Investment Advisory Center, said, “The phenomenon in which landlords pass on the burden of tax and interest rate hikes to tenants will vary depending on rental demand and the availability of the contract renewal application. It can accelerate,” he said.