SEOUL/SEJONG, Nov. 10 (Korea Bizwire) — South Korea will carry out eased lending rules for first-time homebuyers and owners of one home next month as the once-hot housing market appears to be entering a downturn amid rising interest rates, the land ministry said Thursday.
The government has adopted stricter lending rules and other regulations to help stabilize the country’s real estate market in recent years.
Home prices are on the decline across the country, and an even sharper downturn in the market is likely, as surging borrowing costs are scaring away buyers.
“It seems to be inevitable for the real estate market to undergo some correction following a surge in home prices in recent past years. But the possibility of the housing market entering a ‘deep freeze’ needs to be warned against,” Finance Minister Choo Kyung-ho said in a ministers’ meeting.
In response, the government announced last month it will allow first-time homebuyers and owners of one home who want to dispose of their existing homes to take up to a 50 percent mortgage loan for homes worth over 1.5 billion won (US$1.06 million) in speculative districts starting early next year.
But it has moved the effective date forward to Dec. 1.
Currently, mortgage loans are not allowed for homes valued at more than 1.5 trillion won in speculative areas.
For owners of multiple homes, however, the current 60 percent loan-to-value (LTV) ratio will remain in non-speculative areas, and a zero percent LTV ratio will still be applied in speculative areas, the ministry said.
In other efforts to avoid a downturn in the property market and the impact on the economy, the government has lifted regulations in some of 39 overheated speculation zones and 60 regulated areas.
The subjected areas are most of the Gyeonggi Province, except Gwacheon, Seongnam, Hanam, and Gwangmyeong; Incheon, just west of Seoul; and the Sejong Special Self-Governing City.
The government said it will exempt acquisition taxes worth up to 2 million won for first-home buyers.
“The government plans to pursue customized countermeasures to protect the low-income bracket and actual buyers, while stabilizing mid- and long-term supply of houses, and seeking a soft landing of the housing market,” Choo added.