South Korea unveils more property cooling steps amid loan concerns
SOUTH Korea rolled out new steps to rein in property prices, after earlier measures failed to cool demand sufficiently and spurred central bank concerns over mounting mortgage debt levels.
There will be a ramp-up of new home supplies in Seoul and its metropolitan area, the government said in a statement Sunday (Sep 7). The loan-to-value cap on mortgage loans will be cut to 40 per cent from 50 per cent in certain areas, it added.
The announcement follows curbs unveiled earlier this summer, when Seoul apartment prices jumped after the Bank of Korea (BOK) began easing policy. Those measures featured tighter mortgage caps in the capital region and restrictions on foreign buyers.
While the measures taken to date have slowed the pace of gains, prices for apartments in Seoul extended their streak of positive weekly gains to 31 in the period ended Sep 1, nudging 0.08 per cent higher, according to the Korea Real Estate Board.
Household debt has also continued to climb, raising financial-stability risks. President Lee Jae Myung, who took office in June vowing to lower living costs and narrow inequality, faces headwinds as surging home prices thwart his agenda.
The latest measure is focused on expanding supplies of new homes. By 2030, construction will begin for a total of 1.35 million new houses, nearly double that of the past three years’ new home supplies, according to the statement. There will also be an easing of regulations to accelerate redevelopments of aged homes, and a new government organisation established to oversee and investigate property-related crimes.
The export-driven economy is bracing for a blow after the US imposed 15 per cent tariffs on Korean shipments. President Donald Trump warned Thursday that the US would begin imposing tariffs on semiconductor imports “very shortly”, a move that would affect a key industrial driver of Korean growth.
Rate cuts could cushion the shock, but BOK governor Rhee Chang-yong has been reluctant to take that step with elevated property prices and debt levels.
The squeeze prompted the BOK to hold borrowing costs at 2.5 per cent at its last meeting, despite slowing growth, limiting Lee’s ability to deliver on campaign pledges.
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