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Young Koreans max out mortgages: 20s-30s see sole increase in '400-600 million won' home loans
🇰🇷 South Korea /Economy & Trade

Young Koreans max out mortgages: 20s-30s see sole increase in '400-600 million won' home loans

From Dong-A Ilbo · () Korean

Translated from Korean, summarized and contextualized by DistantNews.

At a glance

News Documents & data Context piece
  • Young adults (20s-30s) in South Korea are increasingly taking out large home loans, with the '400-600 million won' bracket seeing the only increase in new mortgage lending.
  • This trend is driven by rising housing prices, particularly in desirable areas like Gangnam, and a desire to enter the market, fueled by high bonuses in sectors like semiconductors.
  • The data suggests a shift towards maximizing loan limits, potentially influenced by government regulations and a strong belief in real estate investment.

Young adults in South Korea, aged 20 to 39, are increasingly leveraging significant home loans to purchase property, with the bracket of loans between 400 million and 600 million won being the only segment to show an increase in new mortgage lending.

This trend is particularly evident in areas like Seoul's Gangnam district, where first-time homebuyers are on the rise, and in rapidly appreciating regions such as Dongtan in Hwaseong City, home to many employees in the semiconductor industry who receive substantial bonuses. The data, compiled from five major banks, indicates a 9.3% year-on-year increase in new mortgages within the 400-600 million won range for January-May, totaling 7.16 trillion won. In contrast, other loan brackets saw decreases.

I felt anxious seeing news that employees of semiconductor companies receiving hundreds of millions of won in bonuses and young people making money from stocks were eventually buying houses and that real estate was stirring, so I borrowed money excessively to buy a house.

— Kang Shin-woo, 30s office workerExplaining his decision to take out a large mortgage for a small apartment in Gangnam.

Experts suggest this surge is a response to government regulations, such as the 600 million won loan limit implemented in June last year, prompting buyers to maximize their borrowing capacity. "The government's successive real estate demand suppression policies seem to have strengthened the mentality among young people in their 20s and 30s to 'borrow as much as possible,'" commented Kwon Dae-jung, a professor at Hansung University.

Furthermore, there are signs of buyers attempting to circumvent loan regulations through other means, such as receiving financial gifts from parents. Data shows that parental gifts and inheritances accounted for 38.4% of the funding sources for property acquisitions by individuals in their 20s and 30s from January to April, an increase from 34.5% in the previous year. Corporate loans offered as employee benefits are also rising, as they are not subject to the debt service ratio (DSR) regulations.

The government's successive real estate demand suppression policies seem to have strengthened the mentality among young people in their 20s and 30s to 'borrow as much as possible.'

— Kwon Dae-jung, Professor at Hansung UniversityInterpreting the trend of young adults maximizing mortgage loans.
DistantNews Editorial

Originally published by Dong-A Ilbo in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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