Gov’t to announce measures to curb rising housing prices

[Photo by MK DB]

The South Korean government is set to announce a “real estate stabilization plan” as early as this week in response to concerns over rising housing prices in Seoul.

The plan is expected to include implementing the second phase of stressed debt service ratio (DSR) rules in September 2024 and aims to curb the increase in household debt while expanding housing supply for low-income residents.

“The government‘s commitment to managing household debt remains firm,” a senior government official said on Monday, referring to the controversy over the delay in the implementation of the second phase of the stressed DSR rule. “We plan to send a message to alleviate market anxiety.”

Korean financial authorities introduced the first phase of the stressed DSR rule in February 2024, applying a base stress rate of 25 percent to bank mortgage loans. The government initially planned to expand the stress rate to 50 percent for bank credit loans and second-tier financial institution mortgage loans starting in July, but recently pushed it back to September, leading to criticism that it was contradicting its stance on curbing household debt growth.

The delay, which came as household loans increase due to special loans for newborns, led to accusations of policy inconsistency as it was done without prior consultation with the financial sector.

“There is no change in the government’s policy to strictly manage household debt,” the senior government official emphasized. “The stressed DSR rule will be implemented as scheduled.”

The government aims to manage the household debt to gross domestic product (GDP) ratio in the low 90 percent range in 2024. It plans to expand middle-class housing supply by conducting a comprehensive survey of aging public office buildings in urban areas for mixed-use development and supplying rental housing, as well as by increasing corporate entry into the small-scale rental market.

According to the Korea Real Estate Board and the Seoul Real Estate Information Plaza, the number of apartment transactions in Seoul increased from 1,790 in December 2023 to 2,456 in January 2024 and continued to rise for five consecutive months to hit 5,182 in May.

The transaction volume in June is expected to be higher than in May. When unreported transactions are taken into consideration, June’s volume is expected to surpass that of May to nearly 6,000 transactions, which is nearly double the 2023 monthly average of 3,036.