SEOUL, June 16 (Korea Bizwire) – The property value of South Korean homes has risen sharply in recent years, data showed Thursday, amid the previous government’s policy to prop up the country’s housing market.
The value of homes in the country stood at over 3,732 trillion won (US$3.32 trillion) as of late last year, up 17.7 percent or 560.6 trillion won from late 2013, according to figures by the Bank of Korea.
Compared with the end of 2015, when the total stood at 3,511 trillion won, value of homes were up 6.3 percent.
The market value for homes in 2016 was equivalent to 2.28 times the country’s annual gross domestic product (GDP), the highest ratio since the beginning of the financial crisis in 2009, when the ratio was 2.3 times. The comparable figures were 1.78 times the GDP in 1995, 2.15 times in 2006 and 2.22 times for four consecutive years from 2010.
The newly launched Moon Jae-in administration, however, has hinted it could revise taxes on property and strengthen restrictions on extending home loans to help reduce soaring household debts.
The previous Park Geun-hye administration eased the loan-to-value (LTV) and debt-to-income (DTI) ratios in 2014 to allow homebuyers to borrow up to 70 percent of their property value and 60 percent of their income for mortgage payments.
The easing of the home loan regulations resulted in a sharp rise of household debt in recent years with household credit exceeding 1,344 trillion won (US$1.18 trillion) as of the end of last year, up 11.7 percent from the previous year, raising concerns over possible havoc in case of interest rate hikes.
Moon has also proposed investing 50 trillion won in the coming five years in the development of new towns and renovation of old city neighborhoods across the country while building 50,000 public rental houses and additional dormitories for up to 50,000 students.