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(News Focus) S. Korea sends strong signal to further stabilize home prices

Economy 18:05 December 19, 2018

SEJONG, Dec. 19 (Yonhap) -- South Korea's plan to provide 155,000 homes near Seoul in the coming years underscored its latest commitment to further stabilizing home prices for ordinary working South Koreans.

Home prices surged dramatically in Gangnam, Seoul's most affluent ward, and other coveted areas in the capital in recent months before the government unveiled a set of measures to rein in the booming housing market.

The tightened regulations have led to a temporary lull in the apartment buying spree, which in turn has stabilized apartment prices in Seoul, home to about one-fifth of South Korea's total population of 51 million.

On Wednesday, the government sent an additional strong signal that it would use all resources available to make sure that the prices of apartments -- the most favored type of dwelling by South Koreans --- could stabilize in the coming years.

The centerpiece of the announcement is the supply of 155,000 homes in Seoul and adjacent areas and improved public transportation systems to ensure residents can commute to central parts of Seoul within 30 minutes, according to the Ministry of Land, Infrastructure and Transportation.

Kim Hyun-mee, minister of land, infrastructure and transportation, speaks during a joint news conference with other officials at the government building in central Seoul on Dec. 19, 2018. (Yonhap)

The four sites designated for large residential complexes with a combined housing capacity of 122,000 are in Gwacheon, Hanam and Namyangju -- all located in Gyeonggi Province, which surrounds Seoul -- and Gyeyang in Incheon, a port city just west of Seoul.

The move is part of South Korea's broad plan to supply 300,000 homes in Seoul and metropolitan areas.

"Housing prices could continue to stabilize as the government will supply homes after tightening rules on loans and taxes," said Park Won-gap, a real estate economist at KB Kookmin Bank.

Ham Young-jin, an official of real estate startup Zigbang, also said the massive supply of homes could help stabilize housing prices in the mid to long term. Ham expects that the new year will see low growth in housing markets due to a wide range of anti-speculative measures.

In 2014, it was legal in South Korea to borrow up to 70 percent of the value of a home, and mortgage payments could be up to 60 percent of a buyer's income.

The relaxed rules were meant to spur growth by boosting the real estate market, but they also sent a clear signal that people ought to borrow more to buy homes.

Fast forward to 2018: South Korea tightened the rules in all "speculative" and "overheated speculative" areas to try to rein in the booming housing market in Seoul and adjacent areas, limiting mortgages to 40 percent of apartment prices and repayments to a maximum of 40 percent of income.

In September, the government also said it would further raise the tax burden on owners of high-priced houses and multiple homes and increase the housing supply in Seoul and adjacent areas.

Yoo Seon-jong, a professor of real estate studies at Konkuk University in Seoul, also said the consistent supply of homes could stabilize housing prices, describing the government's announcement as "a good sign."

Still, he cautioned that the supply of new homes could take time and does not necessarily mean that housing prices in Gangnam will fall.

"Consumer prices rose higher compared with housing prices since the 1970s," Yoo said, adding that there could still be room for hikes in home prices in the years to come.

Many South Koreans view apartments, especially those in Gangnam, as not just homes but as good investment options compared with risky assets, such as stocks and cryptocurrencies.

The median price of apartments in Gangnam hit a record-high of 1.05 billion won in September, up from 567 million won in December 2008, according to KB Kookmin Bank.

The hike has made the ward -- which drew global attention thanks to rapper Psy's 2012 megahit song "Gangnam Style" -- a no-go zone for most ordinary working South Koreans.


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