The Korea Herald


Real estate market thrives in Q2

By 정주원

Published : July 29, 2015 - 16:59

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Korea’s home transactions in the real estate market skyrocketed in the second quarter of this year on rising house rent fees and record-low loan rates, a state-run economic research institute said Wednesday.

According to the report by the Korea Development Institute, the number of residential property transactions nationwide in the April-June period jumped to 340,743, up 39.1 percent from a year ago. The growth rate more than doubled from the first quarter’s 18.3 percent.

By region, the number of residential property transitions peaked in Seoul and its surrounding areas at 179,902 deals, up 64.3 percent from a year earlier. This is almost triple the first quarter’s 22.5 percent on-year growth.

The rest of the country achieved 76,609 deals, up 26.8 percent year-on-year -- a far cry from the first quarter’s 17.6 percent on-year growth. 

The KDI attributed the vigorous housing market to the soaring costs of “jeonse” where a lump-sum deposit is paid up front and returned in full at the end of the lease. Since the landlord profits from the interest of the deposit, the falling deposit interests have pushed up the jeonse requirement.

According to the KDI, the average jeonse deposit in that period reached 71.9 percent of the home price, up from 71 percent in the first quarter. Such a shift drove prospective jeonse tenants to buying houses, taking advantage of the record-low borrowing rate tide, it said.

Korea’s key rate has been bound at an all-time low of 1.5 percent since June, the latest of BOK’s four rate cuts since last August.

Also since last August, the Financial Services Commission set the loan-to-value ratio at 70 percent nationwide for 12 months, and the debt-to-income ratio at 60 percent. The move allowed larger borrowing capacity with the same asset, aimed at reviving the lackluster housing property market.

In addition, the KDI said the housing prices rose 3.3 percent in the second quarter, thanks to the low loan rate tide.

KDI estimated that the moderate rise of housing prices will continue throughout the second half of this year, making sellers more inclined for property sales.

By Chung Joo-won (