[Real Asset Management] "Seoul Villas Under 400 Million Won Are Unrealistic... Falling Home Prices May Become a Trap"

For those under 39 with annual income below 70 million won

Targeting first-time youth homebuyers

Interest rates about 2 percentage points lower than standard Bogeumjari Loan

Build homeownership by repaying principal and interest like

The government has proposed the ‘Youth Future Bogeumjari Loan’ and public housing subscriptions based on shared equity and profit-sharing as alternative measures to restore the housing ladder for young people. The aim is to help turn monthly rent, which disappears as a cost in the current surging home price and unstable rental market environment, into asset accumulation. However, reactions from both the market and young people have been lukewarm. Experts point out that a strong preference for apartments, loan conditions that are far removed from reality, and the unique liquidity risk of non-apartment housing stand as significant obstacles.

A view of the villa district in downtown Seoul from Namsan, Seoul. Photo by Dongju Yoon

Principal and interest equivalent to monthly rent... ‘Non-apartment’ alternatives under 400 million won

According to the Financial Services Commission on August 26, the government’s upcoming ‘Youth Future Bogeumjari Loan’ is a policy mortgage product designed to help young people such as one-person households and those just starting their careers to purchase their own home. It will first be rolled out for non-apartment housing priced below 400 million won, and proposed amendments to the Korea Housing Finance Corporation Act aim to expand coverage to officetels later this year. The main targets are first-time homebuyers aged 39 or under with annual incomes of up to 70 million won, allowing a loan-to-value (LTV) ratio of up to 80%.

The largest incentives are lower interest rates and reduced repayment burden. Authorities are tentatively considering an annual interest rate in the low 3% range, about 2 percentage points below the ordinary Bogeumjari Loan, with preferential LTV benefits for first-time buyers maintained. For example, if you borrow 200 million won for 30 years at an interest rate of 3% per annum, the monthly principal and interest would be around 850,000 won. This is similar to the average non-apartment monthly rent in Seoul, about 800,000 won, encouraging young people to buy their own home by paying principal and interest instead of rent. According to the Financial Services Commission, among young households living on monthly rent, 28.3% live in apartments, while 71.7% live in non-apartment housing.

97% of young buyers choose apartments: ‘Lacks practical relevance’

However, there is significant skepticism about the effectiveness of the policy due to a notable gap between actual housing demand and the strong preference for apartments among young people. According to the Ministry of Land, Infrastructure and Transport’s actual transaction statistics, the average sale price for multi-family and row houses in Seoul with an exclusive area of 85 square meters or less between January 1 and August 19 in 2026 was 409.43 million won. In particular, the average price for villas—those of 60 to 85 square meters, which are most sought-after—reached 542.01 million won.

Kim Jekyung, Director of Tumi Real Estate Consulting, commented, “Although the government’s concern is evident, the ‘under 400 million won’ cap for loan eligibility is far too low. It is hard to find a villa in Seoul for under 400 million won, and even if you do, most have weak product appeal and poor locations. To improve practical usefulness, the threshold should be lowered to at least 600 million won.”

Young people who use policy mortgages show an overwhelming preference for apartments. According to financial authorities, of the total 12 trillion won in Bogeumjari Loans provided last year to those aged 39 or younger, 97% (11.6 trillion won) was used for apartment purchases. A report by the Korea Research Institute for Human Settlements published in March, titled ‘Aversion to Non-Apartment Ownership and Housing Policy Tasks: Focusing on Youth Housing Stability,’ found that 79.7% of respondents cited apartments as their preferred type in first-time home purchase surveys.

Concerns over declining asset values and reduced liquidity when buying non-apartment housing are also burdensome. If a villa, intended as a temporary step-up, cannot be sold or its value drops, it may hinder future apartment subscriptions or moving to better locations. In response, an official from the Financial Services Commission said, “That is possible. Individuals can make their own choices after considering these factors. However, the Youth Future Bogeumjari Loan is not a policy forcing the purchase of non-apartment housing instead of apartments.”

‘Expanding options is positive... Thorough analysis of location is crucial’

Real estate experts give credit to the policy for expanding young people’s housing options, but they also advise careful strategy when considering non-apartment properties.

Ham Youngjin, head of the Real Estate Research Lab at Woori Bank, commented, “With average Seoul apartment prices surpassing 900 million won, it is virtually impossible for young people with limited capital to purchase an apartment outright. The policy opens up ‘housing ladder’ options enabling young people to start in non-apartment housing with ultra-low interest rates and later move into apartments using other policy loans for first-time buyers as market conditions improve.”

However, he also cautioned, “To avoid liquidity risk—being unable to sell when you want—you should focus on properties likely to benefit from redevelopment or those with high turnover such as newly built units near subway stations.”

There are also warnings about unclear market prices and the risk of deposit fraud in the non-apartment sector. Attorney Um Jeongsook from Beopdo Law Firm emphasized, “Non-apartment properties often have unclear market values and inflated sale prices. Buying at a price not accurately reflecting the local market may result in heavy losses at resale, so it is critical to thoroughly review comparable transactions in the area.”

Shared equity and profit-sharing public housing also supplied: ‘Concerns remain’

Meanwhile, for people in their 20s and 30s with insufficient assets, the government plans to supply about 15% of public housing through shared equity or profit-sharing models. These models allow people to either gradually accumulate stakes over 20–30 years with a small initial investment or share profits between the housing fund and the buyer based on the average loan balance after a certain period. Specific details on asset requirements and supply quantities will be announced in October 2026.

Despite the intention to reduce upfront capital burdens, concerns persist over the complexity of maintaining co-ownership over an extended period and the restrictions on property rights. Director Kim Jekyung pointed out, “While this will be some help for young people lacking capital, it is regrettable that, in the end, what young people genuinely want—meaningful new supply options—is consistently replaced with only roundabout policies.”

This content was produced with the assistance of AI translation services.