"An Era Where 'Borrowing to the Limit' is Impossible"... Real Estate Market in Interest Rate Hike Period, 'Affordable Demand' is the Variable

As the trend of rising interest rates continues, various analyses are emerging regarding the direction of the real estate market. While concerns are being raised that auction items are increasing because they cannot withstand the burden of interest due to recent continuous rate hikes, analyses suggest that the patterns are different from the past when considering structural changes in the market.

DSR regulations prevent 'borrowing to the limit', a factor mitigating the impact of interest rate hikes

According to a video from the YouTube channel 'Finance with Toad Tax Accountant', the current real estate market is moving with a different mechanism than during past periods of rapid interest rate surges. The presenter diagnosed that while in past interest rate hike periods, demand that had engaged in 'borrowing to the limit' collapsed due to skyrocketing interest burdens, the current situation is different.

The biggest difference is the application of DSR (Debt Service Ratio) regulations. The presenter explained, "Now, because of DSR, loans are not issued if you pay more than 40–50% of your income toward principal and interest," adding, "Ultimately, it is a structure where loans are only issued to those who can afford it." Before DSR was fully applied in the past, loans exceeding income levels were possible, making 'borrowing to the limit' feasible, but now it has become an era where it is structurally impossible. Therefore, the analysis suggests that the pressure to dump properties due to interest rate hikes may be weaker than in the past.

However, the interest rate hike has not completely resolved market uncertainty. The presenter added, "While the interest rate hike is not as sudden as a big step (raising the base rate by 0.5%p at once), discussions regarding how high the upper limit of interest rates will go still exist," and "A tug-of-war between the interest rate hike period and economic overheating continues." In particular, it was pointed out that if the interest burden of landlords increases during an interest rate hike period, the costs are eventually passed on to tenants or the burden of jeonse loan interest increases, meaning renters can also be vulnerable.

Increase in auction items is a 'lagging indicator', apartment winning bid ratios remain robust

Regarding the phenomenon of properties flooding the auction market recently, it was pointed out that its nature as a 'lagging indicator' must be clearly understood. The presenter explained that "the increase in auction items means that items that were in arrears one to two years ago are only coming out now," noting that it takes anywhere from 7–8 months to over a year to reach the auction market through processes such as bond seizure and appraisal, meaning there are limits to immediately predicting the current sales market through the auction market.

In particular, the patterns of the apartment and non-apartment markets are appearing differently. The presenter warned that "while the winning bid rate for non-apartments tends to fall, for apartment items, the winning bid ratio compared to the appraised value sometimes exceeds 100%," implying that evaluating the entire real estate trend based only on auction indicators may not be neutral. This means that an auction is just one of many real estate methodologies like sales, subscriptions, or pre-sales, and is not an absolute indicator for interpreting the entire market.

Meanwhile, the upward trend in the Seoul villa market was also cited as a notable variable. The presenter mentioned, "Seoul villa prices have risen by about 10% compared to the same period last year, showing a hot trend that exceeds the apartment growth rate (about 6%)," and noted that for demand-side individuals who want to move into Seoul but lack funds, villas can function as an inflation hedge. However, they added that just because villas do not rise as much as apartments does not mean they lack asset value, and if they are new villas in station areas or areas with redevelopment issues, they are worth considering in terms of both residence and asset value. However, they emphasized that when purchasing a villa through an auction, the practical complexities such as eviction are very high, so it is important to seek advice from experts with 10–20 years of experience rather than relying solely on YouTube information.

Strategy for newlyweds and youth, focus on 'policy mortgages' and 'areas adjacent to Seoul'

Realistic advice was also provided for newlyweds and the youth contemplating home ownership. The presenter chose 'utilizing government policy mortgages' as the most priority strategy in the confusing market situation. The explanation is that it is most advantageous to target new complexes within public housing sites through policy finance provided by the government, such as newborn special loans, first-time homebuyer loans, and youth-only loans. In particular, they advised that newlyweds or the youth should prioritize these as they can receive various benefits in special supplies.

For high-income earners who find it difficult to receive policy finance benefits, the options are inevitably narrowed. The presenter explained, "In the past, I used to recommend Han River Belt areas, but currently, they have become too expensive for newlyweds to approach," and "Since the second half of last year, the recommendation range has expanded toward the outskirts of Nowon-Dobong-Gangbuk or Geumcheon-Gwanak-Guro." However, as even these areas are entering levels that are currently burdensome, they suggested that looking at areas like Goyang or Uijeongbu, which are still undervalued among areas adjacent to Seoul, could be a realistic alternative.

Additionally, it was emphasized that new city areas like Gimpo or Geomdan can also provide a stable perspective if one looks for places where demand has not yet fully spread, but in this case, the opportunity cost of the commuting distance must be considered.