Gov’t to Cut Unsold Homes

The declining housing market has been increasing the country’s inventory of unsold housing units, such as this vacant new apartment complex in Daegu.

/ Korea Time

By Kim Tong-hyung
Staff Reporter

The government will dramatically increase its spending to buy unsold homes, according to a package of measures announced Friday to help people struggling with housing costs and the declining housing market.

This market has been slowing considerably since 2008, and the number of unsold homes remains at an alarmingly high level at around 116,000 units, although this is an improvement from the first-half of last year when the inventory reached an all-time high of over 165,000.

Policymakers intend to reduce the inventory to 75,000 units by the end of the year. Their new plan, announced after a meeting of economic ministers at Cheong Wa Dae, has the government spending 3 trillion won (about $2.7 billion) to purchase 20,000 unsold presale apartment units through the Korea Housing Guarantee (KHGC).

The KHGC was established in 1992 after the country introduced the current preconstruction sales system and remains as the only specialized housing guarantee organization in Korea.

The money will be first spent on presale units in regional areas, where the housing markets have deteriorated more severely than in Seoul and the metropolitan area, according to officials at the Ministry of Land, Transport and Maritime Affairs.

Stronger financial support was also promised to jolt the sales of unsold finished homes, mostly through facilitating real estate investment trusts (REITs) and other funds.

The Korea Land and Housing Corporation (LH)'s budget for buying newly-built unsold apartments will double to 1 trillion won, while the Korea Asset Management Corporation will use 1 trillion won from its restructuring fund to lend or invest in housing market funds. The LH is planning to buy 1,000 unsold apartments by the end of the year to feed its public housing pipeline.

The Korea Housing and Finance Corporation will expand its financial support to encourage house buyers to purchase one of the currently unsold new apartments.

``By taking 40,000 unsold homes from the current inventory, we believe that the measures will give more breathing room to construction companies, while also helping people struggling with housing costs,'' said a Land Ministry official.

The difficulties people are experiencing in buying and selling homes are leading to devastating effects on both the markets for new homes and rentals, with the supply of mortgages, sales and house prices skidding quickly.

Would-be house buyers are struggling to relocate to new homes while their existing homes gather dust on the housing market, and this also squeezes the finances of construction companies.

To improve the situation, the government is planning to provide loans of up to 200 million won, at a 5.2 percent interest rate, to people buying the existing properties of home owners who are signed to move into new residences.

However, the loans will be only available to individuals or couples who own one house or less and earn less than 40 million won combined annually.

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