New Real Estate Loan Policy Unveiled

Starting November 20, owners of apartment units with 600 million won market prices or more can take out a mortgage from banks or insurance companies for only 40 percent of their owned homes’ value when the house is located within the speculation zone.

When a homeowner gets a mortgage from so-called secondary financial institutions like mutual savings bank against the same apartment, he or she was able to borrow 60-70 percent of his or her home’s value, but now the limit is down to 50 percent.

By 2010, 125,000 additional houses will be supplied in rental housing complexes and new towns in the metropolitan area, and the selling prices are expected to drop about 25 percent.

The measures state that the government will expand the affected area of debt-to-income from current apartments worth more than 600 million won in the speculation areas to all in speculation zones of the metropolitan area. This is an effort to curb the ongoing mortgage spree, one of the reasons behind housing price increases.

Also, the measure does not allow any exceptions, like longer-than-10-year mortgages against expensive apartments. The owners of apartments more expensive than 600 million won can take out loans for 40 percent of the value of their holdings, unconditionally, while owners of less expensive apartments can get 60 percent.

The government decided to bring down the Korea Housing Finance Corporation’s long-term mortgage loan interest rate by 0.15 percent to strengthen financial support for average Koreans who want to buy a home.

The government also intends to expand the supply of housing. It will increase the density level of development in new towns and rental housing complexes in the metropolitan area, which will boost supply in public lands from 742,000 to 867,000 houses by 2010. Along with this, private housing supply will add 773,000 units, bringing up the total supplies to 1.64 million units in and around Seoul.

The limit on pre-sell units that attracted much attention was not in the discussion. It will be dealt with in the committee for improving pre-sell prices.

Kwon O-kyu, Minister of Finance and Economy and Deputy Prime Minister, mentioned regarding the recent housing price run-up, “Those who stretch to buy a home may be running a risk.”

Meanwhile, the National Tax Service began tax inspections from yesterday on 384 people who are suspected of tax evasion through illegal real estate transactions.

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