South Korea Temporarily Eases Financial Borrowing and Tax Rules to Bolster Housing Market

Strategic Insights -

South Korea has announced plans to temporarily ease financial borrowing and tax rules to help alleviate the sharp drop in housing transactions, which have declined by 50-60% in the past four months compared to the normal period. The measures, announced jointly by the finance, public administration, and land and construction ministries, as well as the Financial Services Commission, aim to raise the ceiling on home loans and delay hikes in registration and acquisition taxes. The government hopes this will enable people to buy homes without affecting the policy goal of stabilizing the housing market.

Key Takeaways:

  • The government has raised the ceiling on home loans to make it possible for people to borrow more money to buy homes.
  • The measures exclude properties in real estate speculation neighborhoods in southern Seoul.
  • Up to 91% of homes in Seoul and the Gyeonggi Province can take advantage of the relaxed rules.
  • People without a home or who own only one residence will be exempt from the debt-to-income ratio ceiling until March 2011.
  • The government will extend the high tax waiver period by two years for people who own multiple residences and opt to sell some of them.
  • Low-income earners can receive up to ¥200 million in low-interest loans to buy new homes.
  • Families with more than three children can receive up to ¥63 million in preferential loans.
  • The government will issue up to ¥3 trillion in P-CBO or CLO to help small-sized construction companies.

Statistics:

  • 50-60% decline in housing transactions in Seoul and the Gyeonggi Province over the past four months.
  • 91% of homes in Seoul and the Gyeonggi Province can take advantage of the relaxed rules.
  • ¥200 million maximum loan amount for low-income earners.
  • ¥63 million maximum preferential loan amount for families with more than three children.
  • ¥3 trillion maximum amount for P-CBO and CLO issuance.
  • ¥900 million maximum home price for exempt from the debt-to-income ratio ceiling.
  • 40-60% DTI ratio range in Seoul and the Gyeonggi region.
  • March 2011 deadline for the temporary exemption from the debt-to-income ratio ceiling.

Sources:

  • "South Korea temporarily eases financial borrowing and tax rules to bolster housing market". Asia Pulse. 30 August.
  • Statement of Land, Transport and Maritime Affairs Minister Chung Jong-hwan. Asia Pulse. 30 August.
  • Government announcement by the finance, public administration, and land and construction ministries, as well as the Financial Services Commission. Asia Pulse. 30 August.