Seoul Home Purchase Affordability Hits 2-Year, 3-Month Low

In the first quarter of this year, purchasing power for homes in Seoul reached its lowest point in two years and three months. This means that even median-income households are finding it harder to buy homes than before.

According to KB Real Estate, Seoul's Housing Purchase Potential Index (KB-HOI) recorded 7.8 in the first quarter of this year. This figure is the lowest since the fourth quarter of 2023 (5.9) and has declined for two consecutive quarters from 11.7 in the third quarter of last year.

This is because while the median household's monthly income in Seoul increased by 13.2% to 6.79 million won in the first quarter of this year from 6 million won in the first quarter of 2023, the median sale price of apartments in Seoul rose by 22.1% to 1.20157 billion won during the same period. Housing prices rose faster than income growth.

Furthermore, the fact that all areas of Seoul have been designated as regulated zones since October of last year, resulting in a 40% LTV applied to non-homeowners, along with DSR regulations and loan limits based on housing price, has reduced the amount of available loans, contributing to the index's decline.

The KB-HOI represents the percentage of apartment inventory that median-income households can afford to purchase within a certain principal and interest repayment range. The current low index is a result of the complex interplay of high housing prices, relatively slow income growth, and tightened lending regulations.