It has been reported that the housing supply measures to be released at the end of January are unlikely to include additional lending regulations. As the real estate market shows signs of overheating, some predicted that loans for dwellings priced over 2.5 billion won would be completely banned, but this package is expected to focus on housing supply plans. Instead, when the government releases its household debt management plan in February, it may take additional steps on the real estate market after the supply measures are announced.
According to the National Assembly and the government on the 28th, the real estate measures to be released at the end of this month are unlikely to include policies related to loans. A government official said, "As of now, the real estate measures to be announced soon do not include policies under the jurisdiction of the financial authorities." Unless housing price instability worsens rapidly, the likelihood of additional lending regulations through the real estate measures to be released soon is low.
Since the Ministry of Land, Infrastructure and Transport said at the start of the year that it would announce additional supply measures, the market has been watching closely to see whether steps to curb housing demand through loans would be added. In the market, talk even circulated that the maximum limit on mortgage loan by dwelling price could be cut by 200 million won each tier. Accordingly, for dwellings over 2.5 billion won, where the mortgage loan limit is 200 million won, lending could be completely banned, the market expected.
Currently, when purchasing dwellings priced at 1.5 billion won or less in the Seoul metropolitan area and other regulated zones, the maximum loan limit is capped at 600 million won. For dwellings priced over 1.5 billion won and up to 2.5 billion won, the loan limit is 400 million won, and over 2.5 billion won, borrowers can get up to 200 million won.
In the market, there was also speculation about extending the debt service ratio (DSR) rule, now applied to jeonse loans taken by owners of at least one dwelling in the Seoul metropolitan area and other regulated zones, to people without dwellings. However, if loan regulation content is omitted from this supply package, the tightening of jeonse loan rules is not expected immediately.
The easing of relocation expense loan regulations, which the market has recently been calling for, is also unlikely within this month. Currently, in the case of a one-dwelling owner who is a member of a redevelopment or reconstruction association, relocation expense loans are allowed only up to 600 million won within a loan-to-value (LTV) of 40% based on collateral. For owners of multiple dwellings, relocation expense loans are completely unavailable. If relocation expense loans fall short, relocations and construction are delayed, which inevitably slows housing supply through urban renewal projects, so the Seoul Metropolitan Government and the urban renewal industry are requesting an easing of relocation expense loan regulations. This year alone in Seoul, 39 project sites (31,000 households) subject to relocation are expected to be affected.
Instead, the government is expected to release its household debt management plan around February and then announce additional regulations based on the market response after the supply package. From the demand side, rather than tightening borrower loan rules, it appears likely to curb demand by imposing total volume controls on household loans at financial firms, the suppliers of credit. Put simply, the plan is to raise the threshold for borrowing itself to rein in overheated demand to purchase dwellings. Easing of regulations on relocation expense loans is also expected to be reviewed.
Lee Eog-weon, Chairperson of the Financial Services Commission (FSC), said at a monthly press briefing that the household debt management plan, including this year's total household debt target, will be released next month. Lee said, "Until now we have looked only at the total volume target, and within that the most important part is mortgage loan. We are also trying to see how to design a separate management target for this mortgage loan," adding, "When pushing the measures, we will look at these parts (relocation expense loan regulations) pragmatically."
The government's additional real estate package is expected to focus mainly on supplying dwellings in city centers. A plan to promote the supply of more than 50,000 dwellings by using sites vacated by military units and land from aging public office buildings in the urban cores of Seoul and the greater metropolitan area is said to be a strong candidate.