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| Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho, second from left, poses with other officials during a joint government meeting to address the housing market downturn at Government Complex Seoul, Thursday. From left are Financial Supervisory Service Governor Lee Bok-hyun, Choo, Minister of Land, Infrastructure and Transport Won Hee-ryong and Financial Services Commission Chairman Kim Joo-hyun. Yonhap |
Eased housing regulations to take effect starting December
By Yi Whan-woo
The government said Thursday that first-home buyers will be able to borrow up to 50 percent of the value of a property to secure their loan as collateral, in a bid to prevent the recent downturn in the property market due to the current costly borrowing rate.
The eased rule on the loan-to-value (LTV) ratio will be up from as low as 20 percent, which was adopted to curb the once-overheated property market. The LTV ratio is used to determine the available loan amount based on one's collateral.
In addition, first-home buyers will be exempted from acquisition taxes worth up to 2 million won.
The government also said the ban on outright mortgages for properties priced over 1.5 billion won ($1.09 million) will be lifted in Seoul and other speculative areas for first-home buyers and single-home owners.
For owners of multiple homes, however, the current zero percent LTV ratio will still be applied in speculative areas and a 60 percent LTV in non-speculative areas.
Nearly 100 areas nationwide, including 39 in Seoul and Gyeonggi Province, have been subject to the government's regulatory control, in terms of housing transactions, to combat speculation or curtail any possibility to do so in advance.
Seoul plus Gwacheon, Seongnam, Hanam, and Gwangmyeong ― all in Gyeonggi Province ― will remain as the country's only areas classified as speculative.
All these changes in housing rules will be effective starting Dec. 1, on the country's path to revive its sluggish economy.
"The possibility of the housing market entering a deep freeze needs to be warned against, while it has been inevitable for the real estate market to undergo some correction following a surge in home prices in recent years," Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho said during a joint meeting with relevant ministers and top financial regulators at Government Complex Seoul.
Choo was joined by Minister of Land, Infrastructure and Transport Won Hee-ryong, Financial Services Commission Chairman Kim Joo-hyun and Financial Supervisory Service Governor Lee Bok-hyun.
The meeting came as house prices in Seoul fell to a 10-year low in the midst of multiple rate hikes delivered by the Bank of Korea (BOK) since August 2021 to fight inflation.
The base rate returned to 3 percent for the first time since October 2012, making repayments tough for homeowners who took out housing loans when the borrowing rate was much cheaper.
A steep rate hike is also scaring away would-be home buyers.
"Under the circumstances, the government plans to pursue customized countermeasures to protect the low-income bracket and actual buyers, while stabilizing the medium and long-term supply of houses, and seeking a soft landing of the housing market," the finance minister said.
Additionally, the government plans to increase project finance guarantees for small and medium-sized projects through the state-run Korea Housing and Urban Guarantee.
Asked how the government's eased housing regulations will help boost the market, Kwon Il, head of the research team at Real Estate Info, speculated that it will take time for the "effect to be sensed across the market."
"The rate increase is likely to go on," Kwon said, noting that inflation is not cooling fast enough and those interested in buying homes would wait until housing prices fall further.
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