The government has introduced the annual 3 trillion won Youth Future Bogeumjari Loan to help young people buy their own home, but the response has been lukewarm. That is because the additional benefits of the new product apply to non-apartment homes, at a time when most young people have chosen apartments when buying homes with existing policy mortgages. The government says it is adding non-apartment housing as an option to an apartment-focused support system, but critics say it is out of step with young people's actual housing preferences.

As of Aug. 19, the financial sector said the government decided to launch the Youth Future Bogeumjari Loan in January next year through real estate financial measures announced on Aug. 13.

The main targets are borrowers aged 39 or younger buying a home for the first time, with annual income of 70 million won or less. For purchases of non-apartment homes priced at 400 million won or less and with exclusive floor space of 85 square metres or less, the loan-to-value ratio will be applied up to 80 percent. The annual supply scale will be 3 trillion won, and it will be operated for a limited period of 2 years.

Behind the product is a plan to link housing costs paid by young people as monthly rent to asset building. In an example presented by the Financial Services Commission, borrowing 200 million won for 30 years at an annual interest rate of 3.0 percent results in a monthly principal-and-interest repayment of about 850,000 won. That is similar to the average monthly rent for non-apartment housing of 800,000 won. In additional explanations on Aug. 14, the FSC said it is tentatively reviewing a plan to apply an interest rate about 2 percentage points lower than the general Bogeumjari Loan.

Still, opinions are emerging that it is uncertain whether demand for non-apartment purchases will follow as much as the government expects, given the home-buying patterns young people have shown so far.

Last year, Bogeumjari Loans supplied to people aged 39 or younger totalled 12 trillion won. Of that, 11.6 trillion won, or 97 percent of the total, was used to buy apartments. That means most young people who bought homes using policy mortgages chose apartments.

◆Clear preference for apartments... experts say support scope should be broadened

Experts positively assess the policy intent of widening young people's home-buying choices, but say limiting support to non-apartments and homes priced at 400 million won or less could undermine effectiveness.

Kim In-man (김인만), head of the Real Estate Economy Research Institute, said, "It is better than not doing it. It is positive in that it adds one benefit." He added, "If you ask whether it has a big effect, it may be limited because it is restricted to non-apartments." It could help some demand, such as villa buyers considering redevelopment, but there is a need to design the scope of support more broadly, he explained.

Kim in particular said there is no need to restrict the housing type to non-apartments. He suggested that young people should be able to choose whether to buy apartments or non-apartments, and proposed reviewing a method of raising the home-price standard while separately managing loan limits. For example, the target could be expanded to homes priced at 800 million won to 1 billion won or less, while placing a separate cap on the actual loan amount.

Some also say the Youth Future Bogeumjari Loan itself does not need to be viewed only negatively. Yoon Soo-min (윤수민), a real estate specialist at NH NongHyup Bank, said, "Even if they want to buy an apartment, among people in their 20s and 30s, those who can purchase an apartment with only their own income are limited." He added, "Among young people who cannot afford to buy an apartment, there can clearly be demand that welcomes such a product."

He said it should be seen as adding one more option for buying non-apartments, since existing Bogeumjari Loans or Didimdol loans are not being abolished.

Still, Yoon also assessed the current scope of support as somewhat narrow. He said, "If you are going to do it, there needs to be more loosening," adding, "If it targets non-apartments, the limits or eligible targets are a bit restricted now. I think it is right from the start to 구성 the people who can receive benefits more broadly."

Yoon also said, "Looking only at the product itself, I do not think it is something that deserves that much criticism." He added, "Given the housing conditions young people face, such as recent home-price rises, criticism can come that the level of support the government has offered falls short of expectations."

◆Financial authorities seek to calm controversy... 'Reviewing expansion of eligible targets'

As criticism continued after the policy announcement that it effectively steers young people toward buying non-apartments, financial authorities also moved to calm the situation.

The FSC explained that the Youth Future Bogeumjari Loan is not designed to reduce existing support for apartment purchases and shift demand to non-apartments, but to provide young people with one more option for buying a home. It said it has not reduced existing policy benefits for young people who want to buy apartments.

According to the FSC, 71.7 percent of young households living on monthly rent live in non-apartment housing. Because there could be demand to 마련 non-apartment housing at monthly-rent levels, it said the purpose is to provide them with additional opportunities to buy homes.

The FSC said the preferential LTV benefit for first-time home buyers will be maintained even if they buy non-apartment housing using the Youth Future Bogeumjari Loan. It said that if a buyer sells the non-apartment home and becomes a non-homeowner again, they can receive the first-time LTV preference again when buying another home in the future.

Separately, as controversy continued, it also left open the possibility of expanding the scope of support in the future. The FSC said it will operate the Youth Future Bogeumjari Loan on a temporary basis for 2 years and review a plan to expand eligible targets after examining usage performance and market conditions.

As a result, the support target currently limited to non-apartments could be expanded in the future to include apartments. Still, whether to expand eligible targets and the specific timing have not been decided.

Ultimately, the key question for the Youth Future Bogeumjari Loan is how much demand among young people currently living in non-apartment housing leads to actual purchases.

The product itself offers a new option, but the key will be whether the support scope limited to non-apartments and homes priced at 400 million won or less can translate into young people's actual housing demand.

Park Hap-soo (박합수), an adjunct professor at Konkuk University Graduate School of Real Estate, said, "As a housing ladder for young people, there are concerns that it may not be easy to trade up when taking into account acquisition costs, investment characteristics and liquidity." He added, "Still, it is better to have a system than none, and there will be demand that can make appropriate use of it."