Korea Takes Steps to Curb Property Bubble in Some Areasby and
Measures target Seoul, Sejong, and parts of Gyeonggi, Busan
Government to designate anti-speculation zones if needed
South Korea’s government said it will take steps to ease overheating property markets in Seoul, Sejong, and some areas in Gyeonggi and Busan.
Finance Minister Yoo Il-ho said the government will limit resale of rights to buy new apartments and strengthen bidding requirements for new apartments in the regions, while monitoring markets and designating anti-speculation property zones if needed. The government will revise necessary rules shortly so that the changes can be applied, Yoo said.
A boom in South Korea’s property market, fueled by record-low interest rates and relaxation of mortgage lending restrictions in 2014, has sustained South Korea’s economic growth in recent years. But there has been increasing concern about the risks posed by soaring household debt and the sustainability of growth relying on construction investment.
Thursday’s measures came after the government released policies in August to curb household debt growth, requiring banks to impose stricter screening for some type of loans, and also limiting the supply of land for housing. Household loans continued to rise after this, leading to calls that government take more steps.
Yoo said at the Thursday government meeting that while the overall property market is stable, there are bubbles in some areas including the Gangnam district where old apartments are being reconstructed. Yoo said uncertainties surrounding economic growth path in the fourth quarter is rising.
The government said in a statement that the measures are aimed at preventing housing market bubble in some areas from spreading, so that it does not become a burden to households should the market see a correction in the future. While the risk of a housing market downturn has increased due to economic uncertainties and potential interest-rate increases, some regions have seen “excessive gains” in property prices on speculative purchases, according to a joint statement from the ministries.
Household debt including credit purchases rose to a record 1,257.3 trillion won ($1.1 trillion) as of end-June, a record high. Yim Jong-yong, who is the current chairman for Financial Services Commission and is set to replace Yoo as finance minister, said on Wednesday that he doesn’t want to allow property speculation, even for the purpose of stimulating economic growth.
Yim will replace Yoo as part of shakeup by President Park Geun-hye as she seeks to stem the fallout from a political scandal shaking her power.
Average apartment purchase prices rose 1.9 percent across the nation in September from a year earlier, prices by KB Financial Group show. The gain was 4.2 percent for Seoul, while some districts like Gangnam reported higher increases at 5.6 percent. Seoul’s property prices had been in constant decline from 2011 through mid-2014.