'Gov't won't allow real estate windfall'

Finance Minister Hong Nam-ki, left, speaks during a press conference to unveil a fresh set of housing regulations at the government complex in Seoul, Monday. Land Minister Kim Hyun-mee is seen on the right. / Yonhap

By Kwak Yeon-soo

The government has vowed to crack down on windfall gains from home ownership under any circumstances, warning property speculators not to purchase apartments for investment, according to the nation's top economic policymaker Monday.

While announcing the 18th anti-speculation policy measures by the Moon Jae-in administration, Finance Minister Hong Nam-ki said the government will introduce more measures to curb rises in housing prices in the first half of 2020 if necessary.

In particular, the number of “gap” investors has increased over the past few years despite the government's set of rules to levy hefty taxes and ban mortgage lending on properties, the minister said. Gap investing is possible when the purchase price and the long-term deposit rent, or jeonse in Korean, are about the same. This allows investors to purchase apartments with little of their own money.

“Gap investing in Seoul, especially in the affluent Gangnam area, accounts for about 60 percent,” Hong said. “The liquidity increase in the market, caused in part by low interest rates, has boosted investor sentiment, leading to soaring housing prices.”

Hong also said the government has spotted a number of abnormal real estate transactions, which may adversely affect public sentiment and discourage young adults from purchasing homes.

The government adopted a package of stricter regulations, stepping up its efforts to curb soaring housing prices.

The new set of rules includes banning mortgage lending on properties valued over 1.5 billion won ($1.3 million), and driving down the requirement for the loan-to-value ratio from 40 percent to 20 percent on those valued at 900 million won or higher but less than 1.5 billion won.

The Moon administration, since taking office in May 2017, has tightened real-estate regulations by lowering the maximum amount of mortgage lending from 60 percent to 40 percent, stressing that the move was aimed at “putting an end to the housing speculation” prevalent across the country.

But such regulatory steps only resulted in a drastic spike in housing prices, particularly in Seoul.

As a result, the government decided to extend its presale price cap system to more privately built apartments across Seoul and Gyeonggi Province.

The price cap system will be newly applied to 37 areas in Seoul, where apartment prices have been surging in recent months, from the current 27 areas.

In addition, 13 areas of Gyeonggi Province, including Gwangmyeong, Hanam and Gwacheon, are subject to the price cap system, according to the ministry.

The latest measures came a month after the Ministry of Land, Infrastructure and Transport announced that 22 areas in four districts south of the Han River and five areas in four districts north of the river will be subject to the price cap system.

“The government may come up with stronger measures to curb housing prices in the first half of 2020,” the minister said.