South Korean Government Eases Housing Market Rules to Bolster Transaction

The South Korean government has taken steps to alleviate the struggling housing market, which has seen a significant decline in transactions since late last year. The Ministry of Land, Transport and Maritime Affairs, the Financial Services Commission, and the finance and public administration ministries have introduced a plan to raise the borrowing limit and delay registration taxes for homebuyers. The measures aim to make it easier for first-time homebuyers to purchase homes using government assistance.

Key Takeaways:

• The South Korean government has introduced a plan to raise the amount of money people can borrow to buy a home, from an unspecified amount to an increased limit.
• The new rules will delay raising registration taxes for the purchase of a home, allowing buyers to benefit from existing tax rates.
• People with no or just one home will not be subject to the current debt-to-income (DTI) ratio ceiling until March 2011.
• The DTI ratio ceiling has been kept at the current 40-60 per cent range in and around Seoul.
• The government will also make it easier for first-time homebuyers to access the 1 trillion won (US$837 million) government housing fund.
• The maximum amount of money people can receive from the state fund is 200 million won.
• The measures aim to reverse the decline in transactions in and around Seoul, which have plunged 50-60 per cent in the past four months.

Statistics:

• 50-60% decline in housing transactions in and around Seoul over the past four months
• 40-60% debt-to-income (DTI) ratio ceiling in and around Seoul
• 1 trillion won (US$837 million) government housing fund
• 200 million won maximum amount of money people can receive from the state fund
• October 2009: Start of decline in housing market transactions

Sources:

• Ministry of Land, Transport and Maritime Affairs
• Financial Services Commission
• Ministries of finance and public administration
• Yonhap