By Na Jeong-ju
Staff reporter
The government will unveil a package of measures aimed at stimulating the real estate market at an economic policy coordination meeting at Cheong Wa Dae, Thursday, officials said Monday.
“At the meeting, which will be presided over by President Lee Myung-bak, the government will announce a property stimulus package,” an official from the Ministry of Land, Transportation and Maritime Affairs said on condition of anonymity. “The package may include easing regulations on housing loans to boost transactions.”
The construction sector has called on the government to raise the loan-to-value (LTV) and debt-to-income (DTI) ratios — the key tools to controlling mortgages — so that banks can provide more loans to homebuyers in a bid to spur housing transactions.
The remarks came after the chief policymaker of the ruling Grand National Party (GNP), Rep. Ko Heung-kil, said earlier in the day the ministry was working on the measures and will announce them soon.
“The market faces a growing need to weaken property rules, although financial regulators have reacted negatively,” Ko said during a meeting of the GNP’s decision-making Supreme Council. “The GNP has also refrained from commenting on the matter, but I think it will now become an issue of public debate.”
The three-term lawmaker said the government should take extreme care in changing property policy because it is a sensitive issue.
However, he suggested that the country ease loans regulations, saying “I hope the measures will be strong enough to revitalize the sluggish housing market.”
The government has kept the LTV ratio at 40 percent and the DTI ratio at 40 to 50 percent in some highly speculative areas in Seoul and the surrounding Gyeonggi Province.
According to Shin Hyun-song, an economic advisor to President Lee, the regulations, introduced by the previous Roh Moo-hyun administration, helped the country avoid a U.S.-style property meltdown in 2008 when the world was hit by the U.S. credit crisis.
However, as the downward spiral of housing prices and transactions continues here, pressure has been growing on the government to reconsider the regulations.
The ministry said Monday that land prices in Seoulfell in June for the first time in 15 months, adding that prices in the affluent southern neighborhood of Gangnam recorded the sharpest decline for the third consecutive month in June.
Policymakers are now focusing on rescuing some debt-ridden homeowners who have had difficulty in selling their homes due to low demand, according to sources from Cheong Wa Dae.
They are also seeking measures to protect some ailing builders, but will have them take “moral” responsibility first for the ongoing slump.
Last month, President Lee urged the government to look into financial problems faced by construction firms. However, he made it clear that they should pay the price for their irresponsible business practices.