A currency trader watches monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Aug 5, 2024. – AP
SEOUL: South Korea announced a series of steps intended to increase housing supplies as it tries to temper a rebounding property market that has frustrated potential buyers and made the central bank cautious about a policy pivot.
The government of President Yoon Suk Yeol plans to ease restrictions on redevelopment projects, help speed up the construction of apartments and provide loan guarantees to developers, according to a Finance Ministry statement that contained a slew of measures. So far, the administration had largely refrained from policy intervention, seeing the rise as limited to certain middle-class neighborhoods.
Rising apartment prices in Seoul have prompted an outcry among home buyers seeking cheaper housing and raised concerns among policymakers who want to prevent asset bubbles. The Bank of Korea held its benchmark rate at a restrictive 3.5 per cent last month and cautioned that its signal of an interest rate cut could further fuel a rally in real estate markets and add to household debt.
It’s unclear whether the latest measures to boost housing supplies will have an immediate impact on Seoul’s real estate market that has often defied government intervention. Citi Research economists Jin-Wook Kim and Jiuk Choi said in a note before the announcement that the stabilization measures could be less effective if mortgage rates remained below 4.2 per cent, compared with 3.7 per cent in June.
A failure to cool the housing market was among major reasons the previous Moon Jae-in government lost the 2022 presidential election, and a mistake the Yoon government wants to avoid. Financial trouble at developers that borrowed aggressively during the pandemic has been a legacy the Yoon government had to deal with. A combination of higher construction and borrowing costs along with default risks have led to fewer housing projects, raising worries about supply shortages. – Bloomberg
