S Korea stays dubious over gov't measures to boost housing market

English.news.cn   2010-08-30 18:31:45 FeedbackPrintRSS

by Na, Haejung

SEOUL, Aug. 30 (Xinhua) -- After over a month of delay, the South Korean government announced a package of policy measures to boost the local real estate market recently going through a slump.

As the Seoul government seeks to ease mortgage restrictions and extend tax breaks to aid those who belong to the lower-income bracket, market observers are divided over the effect of the measures in the market.


The newly announced plan lifts the current ceiling on mortgage loans linked to borrowers' income for homes with the value equal to or under 900 million won (755,000 U.S. dollars) until March 2011.

According to the rule, which aims to support those without a home or who own just one residence, the so-called debt-to-income ratio (DTI) will be temporarily halted, and individual financial institutions will take the initiative in deciding how much loan to be allocated.

The package also extends the waiver for capital gain tax for two years until 2012 for multiple home owners that seek to put some of their residences on the market.

In addition, waivers on acquisition and registration tax are also maintained for one additional year, as the government seeks to boost demand and supply at the same time.

The Seoul government will also increase the number of people who could be allowed financial aid as they seek to purchase home for the first time, while it expands the amount of subsidies for those who look for rental homes.

Under the new program, the government plans to decrease the number of apartment homes to be supplied through the controversial government-led "Bogeumjari Project" for the sake of small-sized, private contractors.

The package also states the government will subsidize small- sized construction companies through primary collateralized bond obligations or collateralized loan obligation amounting to around 3 trillion won (2.5 billion U.S. dollars).

The plan was devised and announced jointly by the Ministry of Strategy and Finance, the Ministry of Public Administration, and the Ministry of Land and Construction, together with the Financial Services Commission.

The move comes amid the sluggish local real estate market, with the number of housing transaction nearly halving since last October.

South Korea has been keeping a tough regulation on those who plan to take out mortgage loans by placing a 40 percent to 60 percent ratio ceiling linked to their incomes, which construction companies have criticized as the main culprit of market contraction.

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Editor: Xiong Tong
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