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S Korea tightens housing rules to curb price surge

Proposed property regulations include changes to mortgage lending and raising of home ownership tax

Seoul

SOUTH Korea on Monday 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 over 1.5 billion won (S$1.73 million), and lowering the maximum amount of mortgage lending on those valued at 900 million won or higher but less than 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 those 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 Tuesday.

"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," the nation's finance minister Hong Nam-ki said in 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.

South Korean President Moon Jae-in has come under criticism that not enough has been done to curb the spike in home prices, especially amid reports that some of his senor aides owned more than one home in areas that have seen sharp price gains.

After the announcement of new housing regulations, Mr Moon's chief of staff, Noh Young-min, urged senior Blue House officials to sell homes they owned in the capital region except their primary homes to take the lead in easing market overheating.

Monday'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 of Korea already cut the key interest rate twice in July and October this year.

The government also said it will 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 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 added.

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.

Apartment prices across the capital city of 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