With the government set to unveil real estate measures next month, attention is focused on the level of any additional lending curbs. The financial authorities are weighing tougher rules on jeonse loans while easing relocation loan limits to spur redevelopment projects. The financial authorities are said to be in the final stages of debating options that could stabilize real estate prices while curbing the growth of household loans.
According to the financial sector on the 29th, the government plans to announce a comprehensive real estate package that includes real estate tax reforms, expanded supply, and lending regulations. Before the announcement, the government will hold a national debate on real estate policy in mid-next month. Ministers from related ministries, including the Ministry of Economy and Finance, the Ministry of Land, Infrastructure and Transport, and the Financial Services Commission, will attend the forum.
The financial authorities are drawing up improvements to real estate lending and reviewing the timing and intensity of implementation. The package is expected to include a ban on guarantees for jeonse loans taken by non-resident single-home owners for speculative purposes. Currently, borrowers can obtain a jeonse loan when moving to another home after leasing out a dwelling in their own name, but the plan is to prohibit this.
Rules on high-priced jeonse are also expected to be tightened. The financial authorities are reviewing limits on guarantees for jeonse loans on high-priced dwellings. Even for those without a home, options under discussion include counting interest payments or part of the principal on high-value jeonse loans toward the debt service ratio (DSR). Currently, DSR is applied only to the interest payments on jeonse loans for single-home owners in the Seoul metropolitan area. Capping guarantees for high-priced jeonse loans is also under review.
Officials are also considering partially easing relocation loan rules to speed up redevelopment projects struggling to raise relocation funds. Some reconstruction business sites have been delayed by union members' difficulties in financing relocation costs, prompting the financial authorities to craft measures. At present, relocation loans in the Seoul metropolitan area are subject to the same rules as mortgage loans: a loan-to-value (LTV) ratio of 40% and a maximum limit of 600 million won.
However, because the financial authorities must maintain their stance on managing household debt, the scope of any relaxation for relocation loans is still under careful consideration. A financial authorities official said, "We are trying to refrain as much as possible from anything that could stimulate the real estate market."
The financial authorities are also looking into in-house corporate loan rules, which have recently been cited as a way to bypass household loan regulations. As private corporations' dwelling loan volume approaches 5 trillion won per year, the financial authorities agree there is a need for regulation. Still, there is criticism that directly regulating in-house loans run by private corporations as part of employee welfare would be excessive, so the issue is being reviewed cautiously.