HF introduces K-HOI

Together with the existing housing affordability index of K-HAI, K-HOI will play a key role in gauging housing opportunities

A new index will help consumers understand how many of the apartments in their area of residence* are affordable at their income level.
   * 16 areas excluding Sejong Special Autonomous City

Korea Housing Finance Corporation (HF) stated on the 10th that it will introduce the Korean Housing Opportunity Index (K-HOI)—a Korean version of the U.S. Housing Opportunity Index (HOI) adapted and amended to local circumstances—and announce the figures annually.

HF introduces a new housing opportunity index called K-HOI
- A higher K-HOI means it is easier to buy an apartment in the area of residence

Representing the number of apartments that can be purchased by median-income households divided by the total number of apartments available, K-HOI has been developed on the basis of official apartment prices from the Korea Appraisal Board (KAB), the median income of salary and wage earners’ households from the National Statistical Office (KOSTAT), and terms and conditions for 20-year, fixed-rate and full-amortization mortgage loans. A higher K-HOI means it is easier for you to buy an apartment in the area of residence. For instance, a K-HOI of 58.2 in Gyeonggi Province indicates that median-income households living in the area can afford to buy 58.2% of the local apartments registered in the KAB price list.

National K-HOI at 63.3 as of the end of 2013

According to HF’s calculation of the national K-HOI as of the end of 2013, median-income households can afford to spend 246.58 million Korean won on housing purchases, with 64.05 million Korean won of their own capital and 182.53 million won of a mortgage loan combined. Out of 6.89 million apartments nationwide, 4.36 million fit into this budget, making the national K-HOI 63.3.

The K-HOI is the lowest in Seoul and Gyeonggi Province, where the levels of household income and net assets are among the highest across the country yet the number of affordable apartments is lower than elsewhere due to steep housing prices. Ulsan, on the other hand, has a considerably higher K-HOI than Seoul and Gyeonggi Province with a similar income level; the industrial city boasts the second highest income level behind Seoul and the highest level of its own capital, while housing prices there remain in the middle rank, making it easier for local residents to buy apartments.

Meanwhile, the highest level of K-HOI is observed in South Jeolla Province (95.8), nearly 3.5 times higher than the nation’s lowest figure in Seoul (27.4).

K-HAI and K-HOI as advanced “twin indices” on housing purchase combining the
market situation and financing

K-HOI was recognized by KOSTAT as a nationally approved statistic—just like the Korean Housing Affordability Index (K-HAI) which HF has announced each quarter since 2008. Against this backdrop, HF plans to compile financial statistics (e.g. household income, loan interest) and real estate data (e.g. apartment prices) and provide the two indices on a regular basis as key references for homebuyers.

K-HAI denotes the burden to repay their home loans for median-income households purchasing mid-end housing. A K-HAI value greater than 100 means a greater burden for homebuyers.

Q4 2013 sees a quarterly increase in K-HAI nationwide due to soaring housing prices

At the end of Q4 2013, the national K-HAI stood at 53.8, up 1.5 points quarter-on-quarter due to an increase in housing prices. A regional breakdown shows that the index went up compared to the end of the previous quarter in all areas except Seoul. In Daegu, South Chungcheong Province, and North Gyeongsang Province, soaring housing prices drove up the figures; Seoul, on the other hand, saw a drop in housing prices, which was found to be the cause of the declining index.

 * Listed by order of ease of housing purchase
  (A lower K-HAI and a higher K-HOI indicate greater ease of housing purchase)

※ NOTE: Change in housing prices applied due to the transfer of operations regarding the national housing price trend survey

An analysis on the year-on-year change in the index was skipped as operations concerning the national housing price trend survey were transferred from Kookmin Bank (KB) to KAB starting January 2013 with the calculation method altered as a result (i.e. KB prices applied until the end of December 2012; KAB prices applied from January 2013 on).