By Park Sang-soo
SEOUL, July 20 (Yonhap) -- Jo Bong-ok, a 40-something housewife with one child of elementary school age, sighs after receiving news that her efforts to buy a new apartment in western Seoul have failed. She has tried to buy a new apartment in Seoul five times so far, but the competition has been intense.
"I am increasingly worried that I can't own my own home in Seoul given rising prices," Jo says. "This time might be the last chance for me to buy a home, although the prices are still burdensome for me to cover, as there are no signs of a let-up in soaring property prices."
Jo is among those jumping on the bandwagon to buy apartments under construction in Seoul whose prices are relatively cheap compared to those of existing old apartments, on concerns that they may be priced out of the market due to a further rise in housing prices down the road.
For the past few years, apartment prices in the affluent Gangnam district and some other neighborhoods have soared on hopes of reconstruction projects moving forward and ample liquidity circulating in the economy.
The average price of apartments in Gangnam, for example, rose to 846 million won (US$746,600) in May this year, up from 821 million won at the end of last year and 664 million won at the end of 2016, according to the data compiled by the Korea Appraisal Board.
The comparable figure in other Seoul areas also shot up to 694 million won in May, compared with 673 million won at the end of last year and 550 million won in 2016.
Alarmed by the hike in property prices, the government has crafted a set of measures, including tightened lending rules for homes, but such steps have not been very effective.
Last year, the government unveiled a slew of measures to tighten lending rules on homes to try to cool the overheated property sector. It adopted stricter rules requiring multiple-home owners to pay a higher capital gains tax when they sell their houses. It also toughened the loan-to-value and debt-to-income ratios for new loans, effectively limiting homebuyers' ability to get home-backed loans based on the value of property they own and their income.
Indeed, the Bank of Korea's eight rounds of rate cuts since 2012 have helped send home prices and household debt to record levels as more people took out loans to buy homes.
Household lending by local banks grew at the slowest pace in three months in June, but mortgage loan growth accelerated, according to data from the Bank of Korea.
Home-backed mortgages climbed by 3.2 trillion won on-month to 584.6 trillion won last month, widening from a 2.9 trillion-won gain in May, the data showed.
But the mood has begun to change recently as the Moon Jae-in government warned that strengthened property taxes and a batch of further restrictions are in store to deter speculators, whom the incumbent administration criticizes for fueling the overheating property market.
Early this month, the current administration proposed revisions to the current tax code on property centering on raising the tax burden on owners of high value houses and multiple homes and increasing the taxable amount of a property.
Under the proposed scheme, the so-called comprehensive real estate tax rate for properties valued at 600 million won or more will be raised by between 0.1 percentage point and 0.5 percentage point, with the maximum rate to be raised to 2.5 percent from the current 2 percent, according to the finance ministry.
The comprehensive real estate tax, first introduced in 2005 under the late President Roh Moo-hyun, has long been controversial here. Taxation on owners of expensive homes and owners of multiple properties during the Roh administration faced strong backlash, which led to a drop in the approval rating of the left-of-center government.
The conservative Lee Myung-bak government eased the tax scheme. But the liberal Moon government, which shares most of the economic policies implemented under the Roh administration, has vowed to impose heavy taxes on owners of high-priced homes and multiple dwellings.
Some data show that housing prices face corrections.
The prices of apartments in the country dropped by the largest margin in five years during the second quarter of 2018, but the prices in Seoul rose 0.8 percent on-quarter during the same timeframe, marking the fourth consecutive year of increases in the capital, the data from the central bank showed.
Home transactions also remained stagnant. According to the data compiled by the Korea Appraisal Board, home transactions for this year are estimated at 810,000, down sharply from last year's 1.05 million, due to toughened regulations.
Given this, Choe Nan-hee (an alias), a real estate agent, forecasts that housing prices in Seoul may remain flat or fall slightly this year, in the face of the toughened government stance. But it is hard to predict by how much, according to the realtor.
"My colleagues here have been always divided over the direction of housing prices, and the way the market behaves is the same now," says Choe, who has run her business for 25 years in Mokdong, southern Seoul.
Housing prices have stalled at high levels, and transactions dropped sharply in recent months, indicating that the property market is at a turning point, according to Choe. "It's neither a seller's market nor a buyer's market," she adds.
In her opinion, many potential buyers are just waiting for runaway property prices go down. "But as was the case in the past, it is unclear whether the prices will go up or down," she says.
Industry insiders say that the central bank's widely expected rate hikes, coupled with increased supply, may work to sap demand for homes down the road.
The Construction Economy Research Institute of Korea (CERIK) predicts housing prices will decline 0.1 percent this year, and the supply of newly built apartments will peak into the first half of next year, likely putting downward pressure on housing prices.
"This year's overall housing prices will suffer a slight fall, not a drastic adjustment," Huh Yun-kyong, a researcher at CERIK, said. "But in some areas such as Seoul, the prices will remain flat at current levels, or rise slightly."
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