SEOUL, July 29 (Korea Bizwire) – To purchase an apartment unit in Seoul, one would have to save their entire income for more than seven years.
In its report on the current status and future prospects of the 2015 Real Estate Market released on July 28, the Korea Appraisal Board talked about the amount of time a Seoulite had to save their annual income to buy an apartment, and discussed factors affecting house prices and increasing jeonse prices.
According to the report, one would have to save every penny for more than seven years to purchase an apartment in Seoul.
The price to income ratio (PIR) is the basic affordability measure for housing in a given area, and represents the amount of time needed for someone to save all his or her income to purchase a house. If the PIR is 10, one would have to save their entire income for 10 years.
The report said the PIR in Seoul was 6.4 but in case of apartments, the preferred form of housing in Korea, it was 7.3. If the PIR is more than 5.1, it is categorized as virtually impossible to purchase a house.
According to a recent report by Performance Urban Planning, the PIR in Hong Kong was 17, followed by Australia (5.5), New Zealand (5.2), Singapore and the UK (5.0), Japan (4.4), Korea (4.0), Canada (3.9), US (3.44) and Ireland (3.0)
Meanwhile, the biggest factor contributing to housing price changes was picked as the unemployment rate, according to the report. The Korea Appraisal Board said that housing prices respond most sensitively to the unemployment rate and when it goes up, housing prices fall.
In addition, the recent hikes of jeonse prices in Korea were not due to the appreciation of the houses, but increases from landlords who are trying to compensate for a loss of income due to lowered interest rates.
By Lina Jang (email@example.com)