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Gov't to curb household debts by shrinking new house supplies

All Headlines 12:12 August 25, 2016

SEOUL, Aug. 25 (Yonhap) -- Alarmed by soaring household debt, the South Korean government said Thursday that it will restrict the supply of new apartments to curb demand for mortgage loans.

Unveiling a package of measures mostly aimed at slowing the growth of mortgage loans, the government vowed to limit the development of additional residential areas and scale down the supply of new apartments by state-owned Korea Land and Housing Corp. (LH), among others.

"The government will strengthen the management of the housing supply in stages in response to concerns about the oversupply of houses leading to an increase in household debt," Finance Minister Yoo Il-ho said at a meeting of economy-related ministers in Seoul.

The government also announced that it will focus efforts on coping effectively with collective lending to buyers of new apartments and borrowing from secondary financial institutions.

Household credit jumped 11.1 percent on-year to an all-time high of 1,257.3 trillion won (US$1,123.5 billion) as of end-June amid prolonged low interest rates and strong demand for new apartments, according to the Bank of Korea.

It's one of the highest household debt levels in the world compared to income and some market watchers describe it as a potential "time bomb" for Asia's fourth-largest economy.

The government has taken a number of measures to tackle the problem but household debt has continued to mount rapidly.

"It's the first time that the management of the housing supply has been included in such measures against household debt (by the South Korean government)," an official said.

lcd@yna.co.kr
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