South Korea Government to Ease Ultra-Strict Housing Regulations
The government is on track to ease ultra-strict housing regulations gradually, amid escalating fears of the market falling into a prolonged slump in line with increasingly clear forecasts of a recession. Under the recent announcement by the Financial Services Commission (FSC), the government decided to raise the upper limit of the loan-to-value ratio by 10 percentage points to 50 percent when people buy housing in so-called speculation-prone areas, such as Seoul. This means those holding cash worth half the price of a certain apartment can buy it by taking out loans. The deregulatory measure comes as part of the government's efforts to activate transactions in the local housing market, which has recently experienced a slump ? at a record-low level. According to data from the Ministry of Land, Infrastructure and Transport, the number of the nation's apartment transactions fell to 18,028 in September, down 67.3 percent from a year earlier when the market was nearing the end of the ascending cycle. The figure for Seoul suffered worse shocks. The transaction volume in the capital city came in at a mere 856, down 77.9 percent from the previous year. This was the lowest since January 2006 when the relevant data started being compiled. Nevertheless, the latest deregulatory measure appears insufficient to help revive the market amid households' growing burden for mortgage loans. Data from the nation's top five commercial lenders, Monday, showed that households have to pay as high as around 7.5 percent in annual interest when taking mortgage loans from them. Of particular concern is that the figure will be on the rise by the end of 2022 when the Bank of Korea is forecast to take additional key rate hikes in line with the U.S. Federal Reserve's hawkish steps. FSC Chairman Kim Joo-Hyun said he would deregulate the market with a focus on driving a soft landing.
Tags : government Korea housing regulations Financial Services Commission market Seoul FSC Chairman Kim Joo-Hyun