South Korea to tighten property curbs as home prices surge

Seoul

SOUTH Korea said on Wednesday it will further tighten mortgage rules and apply property market curbs to additional areas outside the capital Seoul to tackle surging home prices in the metropolitan area.

In addition to Seoul, pockets of Gyeonggi-do province surrounding the capital would be designated as "speculative zones" subject to tougher borrowing rules including a mortgage ban on properties valued over 1.5 billion won (S$1.7 million).

The government also said it would increase capital gains tax and other taxes on property ownership by corporations to rein in speculative investments, as leveraged buying by big companies is increasingly blamed for stoking a housing bubble.

The government of President Moon Jae-in has introduced a raft of measures to cool property price rises since he took office in May 2017 amid a buying frenzy in the overcrowded capital region.

"Under the current administration, property market rules are going only one way, and that's tougher lending rules and higher levies. Those with enough cash will not have much problem, but those who need to borrow to buy homes will," said an analyst at the Korea Appraisal Board.

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"The local market may pause from speculative investments for a while, as there are some excessively heavy restrictions (in Wednesday's announcement) especially with purchasing rights of apartments under construction."

The median apartment price in Seoul was 920 million won as of May, having increased every month so far this year through the course of the coronavirus outbreak. They are up about 52 per cent since Mr Moon took office in 2017.

The median in pockets of Gyeonggi-do province was 379.6 million won, according to data from KB Bank. REUTERS