A year after South Korea tightened lending rules on expensive homes, buyers in Seoul's Gangnam area have sharply cut their use of mortgages, while borrowing has stayed relatively high in outlying districts. In Gangnam District, the amount pledged as collateral relative to a home's price fell from about 40% to roughly 25% over the past year.
An analysis of the ratio of maximum secured claims to sale prices for multi-unit buildings, drawn from the Supreme Court's registry information portal, showed that the median ratio across Gangnam District's administrative neighborhoods fell to 25.28% in September this year from 40.01% in October last year, a decline of 14.73 percentage points. Over the same period, Seocho District fell to 24.69% from 41.22%, down 16.53 percentage points, and Songpa District fell to 27.56% from 42.55%, down 14.99 percentage points. All three districts, which stood above 40% a year earlier, have dropped into the 20% range. The ratio of the maximum secured claim to the sale price indicates how much has been pledged as collateral relative to a property's transaction price, and is typically set at 110% to 120% of the actual loan amount.
Within the Gangnam area, the steepest declines came in neighborhoods packed with high-priced homes. In Cheongdam-dong in Gangnam District, the ratio plunged to 13.10% in September this year from 57.51% in October last year, a drop of 44.41 percentage points. Dogok-dong fell to 8.14% from 41.71%, into single digits. Apgujeong-dong declined to 26.63% from 50.00%, down 23.37 percentage points. Banpo-dong in Seocho District fell to 21.74% from 40.26%, and Jamsil-dong in Songpa District fell to 9.21% from 42.53%.
On the outskirts of Seoul, where lower- and mid-priced homes are more common, the declines were smaller. Guro District fell to 51.83% from 57.87%, down 6.04 percentage points, and Gangbuk District fell to 50.72% from 57.25%, down 6.53 percentage points. Nowon District also slipped to 48.25% from 55.72%, down 7.47 percentage points, while Dobong District fell to 49.68% from 59.08%, down 9.40 percentage points. As a result, the gap between Gangnam District and Guro District widened by 8.69 percentage points, to 26.55 percentage points in September this year from 17.86 percentage points in October last year.
The widening regional divide is attributed to tiered mortgage caps based on home prices, which took effect on Oct. 16 last year. Under the Oct. 15 policy package, the government kept the mortgage cap at 600 million won for homes priced at 1.5 billion won or less in the greater Seoul area and designated regulated zones, while cutting it to 400 million won for homes priced above 1.5 billion won and up to 2.5 billion won, and to 200 million won for homes above 2.5 billion won.
Home prices have followed a similar split. According to weekly apartment price data from the Korea Real Estate Board for the first week of October, Gangnam District (-0.34%), Seocho District (-0.27%) and Songpa District (-0.19%) all extended their declines. Outlying areas including Nowon, Gangbuk and Guro continued to rise, lifting apartment prices across Seoul by 0.12% from the previous week. Despite the correction in the Gangnam area, gains elsewhere kept Seoul apartment prices rising for an 87th consecutive week.
Recorded sale prices show the same pattern. A 107-square-meter unit at Hyundai 8th apartment complex in Apgujeong-dong, Gangnam District, sold for 5.65 billion won in May but changed hands for 4.9 billion won in September, 750 million won lower. An 84-square-meter unit at the Eunma apartment complex in Daechi-dong fell to 3.6 billion won in September from 3.93 billion won in June, a drop of 330 million won. By contrast, an 84-square-meter unit at the Hyundai apartment complex in Gaebong-dong, Guro District, rose to 1.195 billion won in September from 920 million won in April, up 275 million won. A 44-square-meter unit at Guro Doosan in Guro-dong also climbed to 720 million won in September from 497 million won in February, up 223 million won.