Housing Price Anxiety Sparks Rush for Sub-1.5 Billion Won Homes

Amid chronic housing price instability, an "open run" phenomenon has emerged as buyers scramble to secure bargain properties priced below 1.5 billion won ($1.1 million).

While home prices in Seoul's three Gangnam districts and Yongsan have stopped rising, actual homebuyers still perceive an upward trend. Loan regulations have effectively established 1.5 billion won as a psychological threshold.

Through its October 15 real estate measures, the government capped mortgage loans at 600 million won for homes priced at 1.5 billion won or below, 400 million won for those between 1.5 billion and 2.5 billion won, and 200 million won for properties exceeding 2.5 billion won. As a result, transactions have concentrated on apartments below 1.5 billion won, pushing prices higher.

According to the Bank of Korea's March monetary and credit policy report, homes priced at 1.5 billion won or below accounted for 96.2% of metropolitan area housing transactions in January—up 7.6 percentage points from March of the previous year.

The concern is the balloon effect. Regulations targeting high-end properties may stimulate mid-to-low-price loan demand, potentially becoming a trigger for household debt growth. The Bank of Korea also identified the expansion of sub-1.5 billion won housing transactions as a household debt risk factor. While the loan ceiling for this segment is 600 million won, the larger per-transaction loan amounts mean increased sales could directly fuel household debt expansion.

Rising jeonse (lump-sum deposit rental) prices are also driving purchases. Although total household loans declined slightly in February, bank mortgage loans increased by 400 billion won, returning to growth after three months. Notably, mortgage loans from non-bank financial institutions surged by 3.8 trillion won.

Tax and loan regulations may temporarily suppress home prices in certain areas, but the balloon effect is difficult to avoid. The surge in transactions and prices for apartments below 1.5 billion won, followed by loan expansion, appears to be an early warning sign.

Unless urban apartment supply meets actual buyer demand, upward pressure on housing prices will inevitably resurge. It is disappointing that the government continues to focus real estate policy on tax measures such as property tax reform following the expiration of the capital gains tax deferral for multi-home owners.

With supply gaps expected over the next one to two years, authorities must accelerate urban reconstruction and redevelopment, expand transportation infrastructure, and diversify housing supply accessible to ordinary citizens. Only then can the debt-fueled "open run" to buy homes amid price anxiety be halted.