As people in their 30s have emerged as a core pillar of the Seoul metropolitan area's real estate market, their methods of raising funds have changed significantly from the "yeongkkeul" (borrowing to the soul) investment era during the ultra-low interest rate period brought on by the COVID-19 pandemic in 2021. Instead of "gap investment," or buying homes while assuming tenants' deposits, the emphasis has shifted toward their own assets, such as profits from stocks and cryptocurrency, along with financial loans. While realized gains from stock investments boosted purchasing power, gifts have also risen sharply amid a trend of home prices climbing even faster.
According to an analysis by The Seoul Economic Daily on Wednesday of home acquisition funding plans obtained through the office of Rep. Kim Jong-yang of the People Power Party, a member of the National Assembly's Land, Infrastructure and Transport Committee, the average equity ratio (including gifts and other sources) for 22,258 home transactions by people in their 30s from Feb. 10 to the end of April this year was 46.1%, up 5.4 percentage points from 2021. A home acquisition funding plan is a document submitted to the relevant local government within 30 days of a sales contract for all homes in regulated areas and for homes with an actual transaction price of 600 million won or more in non-regulated areas.
The standout item in the change in purchasing power among people in their 30s is proceeds from the sale of stocks, bonds and cryptocurrency. Its share of total funds raised jumped 3.1 percentage points, from 2.0% to 5.1%. The amount per transaction surged about fivefold, from an average of 8.86 million won to 42.3 million won. Analysts say that as the stock market boomed from the start of the year, more people in their 30s cashed in stock profits and put them toward home down payments and other costs.
Deposits fell about 0.4 percentage points in share, but the amount per transaction rose 1.8-fold, from 67.83 million won to 119.89 million won. The share of self-accumulated assets in funds raised was 20.6%, up about 2 percentage points from 18.7% five years ago, while the size per transaction doubled from 84.41 million won to 169.82 million won.
However, home prices also rose steeply during the period, and loans from financial institutions increased sharply as well. With total funds raised per home purchase rising 82%, from 450 million won to 820 million won, financial loans filled the gap left by insufficient equity. The share of loans from financial institutions surged 12.1 percentage points over five years, from 29.1% to 41.2%, and the loan amount per transaction jumped 2.6-fold, from 131.5 million won to 338.72 million won. The high loan dependency of people in their 30s stands out, given that loan shares for those in their 40s and 50s who purchased homes during the same period were lower, at 26.2% and 15.0%.
Ham Young-jin, head of the real estate research lab at Woori Bank, noted, "Although high-intensity loan regulations continue, first-time homebuyers in their 30s buying for actual residence can get a loan-to-value (LTV) ratio of up to 70% even in regulated areas," adding, "The many opportunities for policy loans such as Bogeumjari loans, Didimdol loans and the newborn special program are likely another cause." Analysts also say that the recent sharp increase in high-income dual-earner couples in their 30s influenced the expansion of financial loans, under the debt service ratio (DSR) regulation, in which loan size grows in proportion to income. Among married households in their 30s with children under age 18, the share of dual-earner households rose to 60.4% last year, up 1.9 percentage points from the previous year. It was the first time the figure exceeded the 60% line in the relevant statistics.
Gift and inheritance funds also rose noticeably. Their share more than doubled, from 3.4% to 7.5%, and the amount per transaction rose fourfold, from 15.54 million won to 61.99 million won. As it has become harder to cover rising home prices on their own, support from the parent generation has grown alongside it.
By contrast, the use of rental deposits, a key means of purchases by people in their 30s in 2021, has all but vanished. Its share plunged 19.1 percentage points, from 24.8% to 5.7%, and the amount per transaction fell to less than half, from 112.23 million won to 47.09 million won. The government's gap investment regulations, such as restricting loans for home acquisitions using rental deposits, are analyzed as the direct cause.
Experts also see that people in their 30s, who have become the center of the real estate market, could become the generation that determines the direction of home prices, given that their capital strength is far more solid than in the past. Park Won-gap, chief real estate expert at KB Kookmin Bank, forecast, "The people in their 30s now are leading the real estate market with a qualitatively different capital strength than during the 'yeongkkeul' and 'panic buying' days, when they bought homes as if chased by rising prices," adding, "Just as localized surges appeared in areas that people in their 30s are interested in, such as Dongtan in Hwaseong, they will draw a new topography for the housing market."
