SEOUL • South Korea yesterday announced tighter mortgage rules and curbs on speculative resales of homes in Seoul and parts of Busan - the toughest rules in almost three years as policymakers sought to stabilise hot housing markets amid soaring household debt.
The latest steps are an extension of curbs announced last November, when the government started turning the screws on speculative housing investments amid concerns that a worrying build-up in household debt could leave the economy exposed to a crash.
From July 3, the government will tighten loan limits for home buyers to 60 per cent of a property's value from the current 70 per cent in regions showing signs of overheating including Seoul, the Finance Ministry and financial regulator said.
Debt repayments will be limited to 50 per cent of home buyers' annual income in those selected regions, down from 60 per cent now.
The government will also restrict the resale of newly built apartments in Seoul and some parts of Busan until registration of property ownership is complete, to cool speculation in those regions, it said.
Analysts expect the fresh curbs - the tightest since August 2014 - to have only a moderate impact on the overall housing market.
Indeed, rather than nationwide measures, the government is trying a targeted approach aimed at cities with the most heated property prices to reduce the impact on the construction sector, which grew almost five times faster than the gross domestic product in the first quarter.
At a briefing, Vice-Finance Minister Ko Hyoung Kwon warned of more curbs if overheating continues in the targeted regions.
"If we see and confirm overheating widening, we will be firm in adopting more measures, including designating some regions as overheated speculation zone," Mr Ko said.
The central bank's eight rate cuts since 2012 have helped send home prices and household debt to record levels.
The average price of a Seoul apartment in March exceeded 600 million won (S$732,000) for the first time, an increase of more than 20 per cent from four years earlier.
"Curbing the property market speculation would limit overall household debt growth," said economist Kim Doo Un at Hana Financial Investment.
At 92.8 per cent of GDP, South Korea's household debt even exceeds that of the United States and Japan, Bank for International Settlement data shows.