DECLINE IN APARTMENT PRICES

[Anchor Lead]

Apartment prices continue to decline. In particular, transactions have hit a wall in Seoul's Gangbuk area north of the Hangang river where young people used to buy homes by taking out loans.

[Pkg]

This office worker in her 30s recently gave up her plan to buy a house. Not only have home prices surged in recent years but she can neither afford the steep cost of borrowing.

[Soundbite] (Non-homeowner, Office worker in 30s) : "If I take out a loan, I need to pay 1.5 to 2-fold interest compared to 1 to 2 years ago. I'm not sure that's feasible. I don't think I'll buy a house this or next year."

People in their 20s and 30s accounted for a sizable portion of home purchases last year, leading to price gains. But this is no longer the case. The percentage of apartment buyers in their 30s and younger exceeded 40% for the first time ever in the capital city last year. But the percentage has dipped again this year. People flocked to buy apartment units in Seoul's Gangbuk area last year out of fear that prices will further rise. But the buying spree has fizzled out and the transaction volume has hit a wall. In the past year, prices have dropped by more than 15% and properties are put out for urgent sale. But there are very few potential buyers. In fact, transactions have plummeted by over 70% from last year in the Seoul districts of Nowon-gu, Dobong-gu and Gangbuk-gu.

[Soundbite] (Certified realtor, Nowon-gu Dist., Seoul) : "There are many homeowners in their 30 to 40s in this area because apartment sizes are small and prices are relatively low. However, there are nearly no inquiries from buyers. It wasn't this bad even during the Asian financial crisis."

The government says it will extend the loan ceiling and maturity for young people by taking into account their future income. But even such measures are not expected to revive home purchases in the short term.

[Soundbite] Prof. Kwon Dae-jung(Myongji Univ.) : "Houses that used to sell for KRW 300-400 mn are now priced at KRW 700-800 mn. If buyers take out loans on high interest, that can be a major burden."

Households are also feeling the pinch of high inflation and more interest rate hikes to come. Experts say policy measures should focus less on helping home buyers take out loans but more on providing affordable houses in the first place.