- K-HAI rises for three consecutive quarters since Q2 of 2009 -

The rise in K-HAI was led by rising interest rates on loans (from 5.77% to 5.90% on average) and the hike in home prices (from 185 million won to 185.50 million won), despite the fact that household income remained virtually unchanged in Q4 (0.1% increase over the previous quarter). The cause for rising rates on home equity loans is the continued rise in the base CD rate from 2.41% in June 2009 to 2.64% in September 2009, and again to 2.82% in December 2009.

The index has risen not only in every region, but for homes throughout the nation, no matter what the size. Most notably, the rise in home prices in Busan, Daejeon, Seoul, Incheon, and Daegu led to a K-HAI increase of 2 points or more over the previous quarter in these regions. On the other hand, the change in home prices in Gyeongsangbuk-do, Jeju-do, Gangwon-do, Jeollabuk-do, and Gyeonggi-do regions was relatively low, resulting in a smaller increase in the index.

The K-HAIs for the Seoul metropolitan regions including Seoul (164.5), Gyeonggi (101.0) and Incheon (92.5) surpassed the national average by a large margin (77.1), indicating that the cost of home ownership by urban workers in the Seoul metropolitan area is significantly high. Despite the rise over previous quarters, the K-HAIs for regions outside the Seoul metropolitan area were way below the baseline of 100, showing that the cost of home-buying is low in these regions.

What is K-HAI?

The Korea Housing Affordability Index, or K-HAI, was developed by Housing Finance in 2008 by adapting the concepts of Canada’s Housing Affordability Index to the Korean market. The index establishes a base value of 100 when a median-income family has sufficient income to purchase a median-priced home. A higher index number indicates that the family would take on a higher financial burden when buying a home.