Housing prices far outpace rise in family income

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Housing prices far outpace rise in family income

Rising apartment prices over the last five years have prolonged the period it takes for an urban worker to buy a 105-square-meter apartment in Seoul by two years and five months, statistics from a private realty information provider showed yesterday.
Budongsan Bank’s analysis of household income from the National Statistical Office and the price of apartments in Seoul showed that it would take an average of 10 years and nine months for a household in the capital city to purchase a 105-square-meter apartment in the third quarter of this year if the family devoted their entire income to the price of the house. In the first quarter ended March 31 2003, right after President Roh Moo-hyun took office, it took eight years and four months.
While urban households’ monthly earnings advanced 28.5 percent from 2.9 million won ($3,144) in the first quarter of 2003 to 3.7 million won in the third quarter of 2007, the average price of a 105-square-meter apartment in Seoul jumped 66.5 percent to 482 million won in the same time span.
Apartment prices differed among Seoul districts. The time it takes to purchase a 105-square-meter apartment in the three most expensive districts ― Gangnam, Seocheo and Songpa in southern Seoul ― lengthened by six years and four months to 20 years and eight months since 2003. Other areas saw the period grow by 11 months for an apartment of the same size, according to Budongsan Bank. “Northern Seoul had less growth in the amount of time it takes to buy an apartment,” a group spokesman said.
President Roh has been bent on quelling real estate speculation, especially in the affluent Gangnam neighborhood. A variety of intensified restrictions and taxes has slowed rising apartment prices in that area, but over the five years since he took office, prices there have still far outpaced other housing markets.
Meanwhile, fixed interest rates on housing loans have passed 9 percent annually and floating rates have passed 8 percent. Short on cash due to falling deposits, lenders are issuing more bonds and certificates of deposit, which has led to declines in bond prices and higher lending rates.
As 50 trillion won worth of bonds approach maturity date early next year, banks will inevitably increase bond issuance. This will further propel bond rates and fixed rates on housing loans, which are tied to bond rates, analysts forecast.

By Seo Ji-eun Staff Reporter [spring@joongang.co.kr]
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