Finance minister vows to curb real estate price hikes

By Nam Hyun-woo

Finance Minister Kim Dong-yeon said Tuesday that he will not tolerate speculative investment in real estate, signaling a package of steps to cool overheating home prices in Seoul.

At a meeting with economic ministers, he said soaring apartment prices in and around Seoul are the key factor behind surging household debt, which currently stands at 1,360 trillion won ($1.21 trillion).

This is nearly 93 percent of the country’s 2015 gross domestic product, and the eighth highest in the world.

“I will keep an eye on property price trends, especially in a few regions in Seoul,” Kim said. “Let me make it clear that I will by no means tolerate real estate speculation.”

His remarks are in tandem with the government’s recent move to beef up regulations on mortgages at a time when apartment prices have jumped — they have gone up 2 percent in Seoul alone this year.

Analysts expect that the Moon Jae-in administration will come up with a set of measures to tighten borrowing rules to reduce the number of mortgages.

The top fiscal policymaker noted that the country is prepared to deal with any possible fallout from the U.S. Federal Reserve raising its key rates; and may be considering more fiscal expenditure.

Hours later, Kim met Bank of Korea (BOK) Governor Lee Ju-yeol. In their first luncheon meeting, they agreed to cooperate in addressing economy-related tasks.

“The BOK is serving a critical role in the economy and I visited the BOK as the second destination after I took office last week because I wanted to express my respect to the central bank head and promise cooperation with him,” Kim said.

His first visit was to the National Assembly, Monday, to persuade lawmakers to pass a supplementary budget drawn up for job creation.

Lee said that the Korean economy is facing uncertain and unfavorable conditions such as the Fed’s expected interest rate hike, household debt and soaring youth unemployment.

“The central bank will closely cooperate with the government so that there will be a harmonious policy mix,” Lee said.

The meeting took place a day after the central bank chief hinted at a tightening of monetary policy. Analysts said that the BOK might raise the record-low policy rate of 1.25 percent, which it has kept frozen for the past year.

If the BOK opts to raise the rate, there could be discord between fiscal and monetary policies, hampering efforts for economic recovery.

Against this backdrop, questions have arisen over how the ministry and BOK narrow the difference between the government’s expansionary fiscal policy and the central bank’s shift to tightening.