South Korea's Financial Regulator Warns of Housing Market Bubble

South Korea's financial regulator is taking a cautious stance on the country's rapidly rising housing market, warning of a potential bubble and urging local banks to rein in their mortgage lending. The Financial Services Commission, led by Chairman Chin Dong-soo, has strengthened home-backed lending rules to prevent lenders from taking on excessive risk. This move comes as the regulator has observed a surge in mortgage lending, with banks extending an average of 3 trillion won (US$2.32 billion) per month this year.

Key Takeaways:

• The Financial Services Commission has strengthened home-backed lending rules to enhance the financial soundness of lenders.
• Local banks are being urged to rein in their mortgage lending to prevent a housing market bubble.
• Mortgage lending has surged by an average of 3 trillion won (US$2.32 billion) per month this year.
• The regulator has set a cap on mortgage lending of up to 50 percent of a residence's value in Seoul and its adjacent areas.
• Some experts argue that the tightened rules could hinder the economic recovery and the construction industry.
• The problem of unsold apartments has lingered, particularly in provincial areas.
• The government has imposed heavy taxes on multiple home owners as a measure to curb soaring housing prices.

Statistics:

• Mortgage lending has surged by an average of 3 trillion won (US$2.32 billion) per month this year.
• The cap on mortgage lending has been set at up to 50 percent of a residence's value in Seoul and its adjacent areas.
• In 2006, lenders were extending home-backed loans at similar levels to this year's average monthly lending.
• The government imposed heavy taxes on multiple home owners in 2006 to curb soaring housing prices.

Sources:

• Asia Pulse
• Yonhap