President Lee Jae-myung said at the "real estate grand debate" that jeonse loans are among the causes of rising home prices and noted the need to improve the system. At the same time, he questioned the need to support jeonse loans for non-resident single-home owners. Citizens at the debate called for improvements to real estate finance rules, including making the regional total debt service ratio (DSR) standard more realistic and easing final payment loan regulations.
On the 23rd, at the "national debate on real estate policy" held at the KBS annex in Yeouido, Seoul, Lee spoke in this vein. "There are many reasons why apartment prices rose abnormally," he said, "but a major cause, along with the low burden of holding real estate, was the near-unlimited support for jeonse loans."
Lee said, "Jeonse loans are a policy for stabilizing housing for ordinary people, but they have also fueled higher home prices, so it is time to adjust," adding, "We have already reduced the loan limit and guarantee ratio, but going forward, general jeonse loans need to be managed more strictly."
However, he said, "We must continue targeted support for essential end users such as young people, newlyweds, and first-time jeonse loan borrowers," and added, "It is desirable to keep supporting these groups while gradually adjusting general jeonse loans."
Lee then said, "I question whether we need to support loans even for someone who already owns a home to obtain a jeonse elsewhere," and asked attendees for their views. Lee Eog-weon, chair of the Financial Services Commission (FSC), explained, "Even for non-resident single-home owners, there may be some genuine housing demand, so we offer limited support with a reduced cap compared with before," adding, "In the past the cap allowed up to 400 million to 500 million won, but it is now around 200 million won, and we also reflect the interest burden in DSR calculations."
In response, Lee said, "I think the direction of reducing it is right," but added, "We need to keep examining whether additional jeonse loans are truly necessary for those who already own a home."
At the debate, real estate agent An Dong-seong, who lives in Jeju, said, "DSR rules applied uniformly to the provinces and the greater Seoul area do not sufficiently reflect local realities." He said, "Most dwellings traded in Jeju are in the 400 million to 500 million won range, but the average worker's monthly salary is 2.71 million won, or about 33 million won a year," adding, "With the current 40% DSR and the stress DSR applied, in practice you can only buy dwellings in the 300 million to 350 million won range." He then proposed, "Please consider distinguishing between non-adjusted areas and adjustment-target areas so that, even if metropolitan rules are maintained, some DSR application is exempted for the provinces."
Lee said in response, "That is a reasonable point," adding, "It is hard to capture every situation with only general rules, so we need to make policy more granular."
Kim Je-gyeong, head of Tumi Real Estate Consulting, argued that to revitalize redevelopment and reconstruction, rules on relocation expense loans should be improved. He emphasized, "Demolition and groundbreaking are only possible after all residents relocate, and if relocation expenses are not supported solely because someone owns multiple homes, the project itself cannot proceed," adding, "Even partially easing relocation expense rules would greatly invigorate redevelopment and reconstruction projects."
Park Min-seop, who rents in Seoul on a monthly basis, asked for system improvements, citing a case in which he could not receive first-time homebuyer benefits due to inheritance. He said, "Neither my spouse nor I have ever bought a home, but when I was a minor my father passed away and I inherited a portion of the equity in dwellings, and before I became an adult we sold everything for financial reasons," adding, "Simply because there is a homeownership record in the system, I became ineligible for the first-time LTV 70% benefit."
Lee said, "We will consider creating a system to review and provide relief for extremely exceptional cases through a deliberative body such as a citizens' committee."