The government said on the 14th it will cut off funds in financial markets from flowing into the real estate market in the second half of this year. It will do so by increasing the burden on the financial sector for high-risk mortgage loans and imposing additional capital buffer requirements. When banks make loans, they must set aside a certain percentage of the loan amount as emergency funds (own capital) in case of non-repayment, and the plan is to raise this ratio. This would reduce banks' lending capacity.
◇ Tightening mortgage loans and revising policy loans
The Ministry of Economy and Finance announced the "Second-half 2026 economic growth strategy" on the day, centered on these measures. To curb real estate overheating, the government will distinguish high-risk mortgage loans and increase the burden on borrowers and the financial sector for them. There is currently no definition of high-risk mortgage loans, but loan size and the debt service ratio (DSR) are being discussed as criteria to classify them.
It will also raise the risk-weighted assets (RWA) for mortgage loans. RWA is the percentage of the loan for which a bank must set aside its own capital; the higher this figure, the more capital a bank must hold when extending a loan. That reduces banks' lending supply capacity. The lower bound for banks' mortgage loan RWA was raised from 15% to 20% starting this year, and the government plans to increase it further.
It will also revise income requirements for policy loans, which have relatively low interest rates, to adjust eligibility. An official at the Financial Services Commission said the move is "to prevent policy loans from expanding excessively, except in cases that require policy support, such as newlyweds." The guarantee coverage ratio for jeonse deposit insurance subscribers will be gradually reduced. However, young people without dwellings and vulnerable groups are exceptions. The permissible jeonse-to-price ratio for jeonse deposit return insurance will also be lowered in stages to block subscriptions for units at risk of "empty-can jeonse."
◇ Third new towns including Wangsuk and Gyeyang, expand supply of urban dwellings
In the second half of this year, the government will break ground on 12,000 units in third new towns including Wangsuk in Namyangju, Gyeonggi Province, and Gyeyang in Incheon. Considering that 6,000 units were started in third new towns in the first half, a total of 18,000 units will start this year. The main areas breaking ground this time are Wangsuk in Namyangju (6,800 units) and Gyeyang in Incheon (1,100 units).
Regulations on remodeling multiunit dwellings will be eased. Currently, to remodel multiunit dwellings, consent from 75% of individual homeowners is required, but the government plans to revise the Enforcement Decree of the Housing Act within the year to relax this to 70%.
To prevent jeonse deposit fraud, the Jeonse and Monthly Rent Stabilization Organization will manage tenants' jeonse deposits and promote a safe trust program that provides monthly revenue to landlords. On this, an official at the Ministry of Land, Infrastructure and Transport said, "As the project is in its early stage, the model has not been finalized specifically," adding, "We will announce the details soon."