Urban Workers Find Buying a Home More Expensive
- Date 2009-09-14
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- Reduced incomes leave K-HAI index higher in second quarter
As household incomes go down and home prices go up, urban workers are finding that buying a home is more expensive.
The Korea Housing Finance Corporation (KHFC, CEO Joo-jae Lim) announced on September 14, 2009 that the composite K-HAI (Housing Affordability Index) for the nation was 73.7 as of the end of June, a 0.8 percentage point increase from 72.9 in end of March.
Introduced by KHFC in 2008, the K-HAI index reaches a value of 100 when the median-income family has sufficient income to purchase a median-priced home. A lower index number indicates that more households can afford to purchase a home.
A survey of the K-HAI index for the 2nd quarter revealed an increase for almost all regions in the nation except for Daegu and Gwangju. The index for Seoul, the highest nationwide at 156.7, increased by 1.3 percentage points from the 1st quarter (155.4), thus indicating that the conditions for housing purchase are less favorable. Gyeonggi-do Province, where the index had the largest percentage point drop in the 1st quarter, increased in the 2nd quarter to near 100 (from 98.2 to 99.4).
The major factor behind the increased financial burden of home purchases, despite the overall fall in mortgage interest rates (5.43%→ 5.25%) in the 2nd quarter, is that household incomes fell due to the economic depression, while housing prices increased. A survey by the Statistics Agency of Korea showed that household incomes for the 2nd quarter fell by 1.7% from the 1st quarter, while prices of homes 135m2 or less increased by 0.8% on average.
By region, Busan (57.8), Daejeon (56.0), Ulsan (44.4), and regions other than the Metropolitan areas had K-HAI indexes significantly below 100, showing that housing purchases in these regions are generally affordable.
However, the K-HAI index for large-size homes exceeding 135m2 was over 100 for all regions except Jeollanam-do Province. The index for homes exceeding 85m2 was also above 100 for most metropolitan areas, showing that the purchase of mid- to large-size homes is still difficult.
By home size, the index for homes 135m2 or less went up overall, while the index for large-size homes of more than 135 m2 decreased by a small percentage point (261.9→258.4).