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Oversupply and Tighter Lending Threaten Korea's Property Market

  • Housing transactions are at the highest level since 2006
  • Government is seeking to curb loan growth as debt swells
Lotte Castle apartment buildings, developed by Lotte Engineering & Construction Co., right, stand in Gimpo, South Korea, on Tuesday, Sept. 30, 2014. South Korean President Park Geun Hye’s success in reviving the property market is prompting the country’s sole issuer of bonds backed by home loans to plan record sales of the notes.
Photographer: SeongJoon Cho/Bloomberg

South Korea’s brisk property market has been a bright spot in an economy that has struggled for much of this year. Now, an oversupply of new homes and tougher lending rules may signal an end to the boom.

Real estate has been the biggest beneficiary of record-low interest rates, with construction investment growing more than five times as fast as the nation’s economy in the April-June quarter. There were more housing transactions in the first eight months of 2015 than in any year since 2006. Further, pre-sales of new apartments have soared.