S. Korea imposes property curbs to rein in prices

SEOUL • South Korea yesterday announced a fresh set of property regulations, including tighter mortgage rules, aimed at curbing red-hot home prices.

The proposed rules include banning mortgage lending on properties valued at over 1.5 billion won (S$1.7 million), and lowering the maximum amount of mortgage lending on those valued between 900 million won and 1.5 billion won, the government said in a statement.

The loan-to-value ratios will be lowered to as low as 32 per cent from the current 40 per cent for properties valued between 900 million won and 1.5 billion won, and are expected to be effective as of Dec 23, according to the statement.

The mortgage lending ban on high-priced homes will be effective as of tomorrow.

"Driven more by speculative investors seeking unreasonably high gains, there are needs to prevent property market disturbance and to ensure stable supply and demand of properties," South Korean Finance Minister Hong Nam-ki said at a news conference in Seoul.

Fast growth in property prices has frequently persuaded the central bank to raise interest rates or keep them unchanged when it could lower them.

Yesterday's measures come as analysts have predicted the Bank of Korea would pause for a while and watch the property market situation before deciding whether to deliver a third rate cut in the current easing cycle. The bank had cut the key interest rate twice in July and October.

The government also said it would raise the home ownership tax to between 0.6 per cent and 4 per cent from the current 0.5 per cent to 3.2 per cent, the statement showed.

The proposed rules include banning mortgage lending on properties valued at over 1.5 billion won (S$1.7 million), and lowering the maximum amount of mortgage lending on those valued between 900 million won and 1.5 billion won.

"(The government) will closely monitor the effect of the latest housing rules and it may also take additional steps to curb housing prices in the first half of 2020 if needed," Mr Hong said.

Last year, the government laid out plans to impose tougher taxes on property ownership to rein in owners of expensive homes blamed for stoking a speculative housing bubble in the main regions across the nation.

Flat prices across Seoul rose a modest 1.8 per cent so far this year, according to Kookmin Bank data, but local media have reported prices soared by double-digit rates in selected towns in the city.

REUTERS

A version of this article appeared in the print edition of The Straits Times on December 17, 2019, with the headline 'S. Korea imposes property curbs to rein in prices'. Subscribe