One year after South Korea tightened borrowing limits on expensive homes, buyers in Seoul's affluent Gangnam area are relying far less on mortgages, while those in outlying districts continue to borrow at relatively high levels. In Gangnam District, the ratio of collateral pledged against home prices fell to about 25% from 40% over the past year.
Based on an analysis of Supreme Court registry data on the ratio of maximum secured claims to sale prices for multi-unit buildings, the median ratio across Gangnam District's administrative neighborhoods dropped 14.73 percentage points to 25.28% in September from 40.01% in October last year. Over the same period, Seocho District fell 16.53 percentage points to 24.69% from 41.22%, and Songpa District declined 14.99 percentage points to 27.56% from 42.55%. All three Gangnam-area districts, which stood above 40% a year earlier, have slipped into the 20% range. The ratio shows how much collateral is pledged relative to a property's transaction price, and is typically set at 110% to 120% of the actual loan amount.
Within the Gangnam area, declines were steepest in neighborhoods packed with high-priced homes. In Cheongdam-dong, the ratio plunged 44.41 percentage points to 13.10% in September from 57.51% in October last year. Dogok-dong fell to 8.14% from 41.71%, dropping into single digits. Apgujeong-dong declined 23.37 percentage points to 26.63% from 50.00%. Banpo-dong in Seocho District dropped to 21.74% from 40.26%, and Jamsil-dong in Songpa District fell to 9.21% from 42.53%.
By contrast, declines were modest in Seoul's outlying districts, where mid- and lower-priced homes are more common. Guro District fell 6.04 percentage points to 51.83% from 57.87%, and Gangbuk District declined 6.53 percentage points to 50.72% from 57.25%. Nowon District slipped 7.47 percentage points to 48.25% from 55.72%, and Dobong District fell 9.40 percentage points to 49.68% from 59.08%. As a result, the gap between Gangnam and Guro districts widened by 8.69 percentage points to 26.55 percentage points in September from 17.86 percentage points in October last year.
The widening regional divide is attributed to tiered mortgage limits 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 or below 1.5 billion won in the greater Seoul area and other 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 are now diverging along the same lines. According to the Korea Real Estate Board's weekly apartment price survey for the first week of October, Gangnam District fell 0.34%, Seocho District 0.27% and Songpa District 0.19%, extending their declines. Outlying districts including Nowon, Gangbuk and Guro kept rising, lifting Seoul's overall apartment prices 0.12% from the previous week. Despite the correction in the Gangnam area, gains elsewhere pushed Seoul apartment prices to an 87th straight week of increases.
Recorded sale prices tell the same story. A 107-square-meter unit at Hyundai 8th apartment complex in Apgujeong-dong sold for 5.65 billion won in May but fetched 4.9 billion won in September, 750 million won lower. An 84-square-meter unit at Eunma apartment complex in Daechi-dong fell to 3.6 billion won in September from 3.93 billion won in June, down 330 million won. By contrast, an 84-square-meter unit at Hyundai apartment complex in Gaebong-dong, Guro District, sold for 1.195 billion won in September, up 275 million won from 920 million won in April. A 44-square-meter unit at Guro Doosan in Guro-dong also rose to 720 million won in September from 497 million won in February, a gain of 223 million won.