South Korea unveils another $10 billion in financing to help property market

The nation’s housing market has continued dropping after the worst monthly decline since the global financial crisis in August. PHOTO: AFP

SEOUL – South Korea rolled out fresh measures to help its struggling real estate market, after a decline in home prices worsened recently.

The government will have state-owned enterprises guarantee additional project financing of 10 trillion won (S$10 billion) “to curb excessive contraction of housing projects”, according to a joint statement from several ministries on Thursday. 

That adds to 10 trillion won of similar guarantees already unveiled in October as part of a broader 50 trillion won aid package for the nation’s crisis-stricken credit market.

The housing market has continued dropping in recent weeks after the worst monthly decline since the global financial crisis in August, as the central bank along with others globally raises interest rates to fight inflation. That has fed into one of the worst routs ever in the local credit market. 

One trigger was a default in late September on a project finance asset-backed commercial paper by the developer of the Legoland Korea theme park in Gangwon province to the north-east of Seoul. Since then, commercial paper yields have continued to rise to levels not seen since the global financial crisis. 

While a partial decrease in housing prices, which had risen excessively in the past, is inevitable, the government should be vigilant about the possibility of a sharp cooling in the market combined with the recent steep interest rate hikes, Finance Minister Choo Kyung-ho said in the statement. BLOOMBERG

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