"2·20 Real Estate Measures: Choosing Economic Stimulus Over Housing Market Stabilization"

[Asia Economy Reporter Minyoung Kim] While the government's 2.20 real estate measures announced the day before have a limited impact on the housing market, there is a prospect that they could rather help stimulate the economy.

On the 21st, Youngsoo Seo, a researcher at Kiwoom Securities, stated in his report titled "Implications of the Government's 2.20 Real Estate Measures: Choosing Economic Stimulus over Housing Market Stabilization" that "To stabilize the housing market, speculative demand must be fundamentally blocked through measures such as principal and interest installment repayment and expanded application of the Debt Service Ratio (DSR), thereby inducing the sale of houses by heavily indebted multi-homeowners." However, he pointed out, "This time as well, by suppressing demand from genuine buyers in specific areas through Loan-to-Value (LTV) ratio regulations, demand was induced toward areas excluded from regulation. In the case of Gyeonggi Province, where prices have recently surged, the jeonse-to-price ratio is around 70%, so from an investor's perspective, there is no need to use mortgage loans."

The day before, as the apartment market in some parts of Gyeonggi Province showed strength, the government designated Yeongtong and Jangan districts in Suwon City, Manan district in Anyang, and Uiwang City in Gyeonggi as housing adjustment areas, lowering the LTV to 50% for properties under 900 million KRW and 30% for those above 900 million KRW. Along with strengthening management of loans to developers in these housing adjustment areas, the government also mandated disclosure of financing plans for housing transactions exceeding 300 million KRW.

Researcher Seo predicted that the government's real estate policy would increase household debt risks. He analyzed, "In the second half of last year, the real estate market entered an overheated phase following a shift to a stimulus stance, including a base interest rate cut. By the end of December last year, the Seoul apartment price index had risen 18% compared to the low point in April of the same year, and transaction volumes reached their highest since 2017." He added, "As a result, improvements were seen even in the auction market and apartment subscription market, significantly reducing the risk of potential defaults in commercial real estate and real estate project financing (PF), which could be considered latent non-performing loans for banks."

According to Seo's report, unsold apartments in December last year decreased to one-third compared to six months prior. The government's real estate stimulus measures were successful, leading to significant improvements in securities firms' real estate finance performance and bringing bank soundness to historically low risk levels.

Seo evaluated, "As the real estate market entered an overheated phase, the government belatedly introduced the 12.16 measures followed by the additional 2.20 measures. However, at this stage, rather than sharply contracting the housing market, the focus is on diffusing demand to less popular areas in Gyeonggi Province and other provinces, thereby resolving potential non-performing factors such as unsold apartments and commercial properties." This suggests that the 'balloon effect' of apartment prices due to regulations in the metropolitan area will spread to provincial areas.

He added, "The favorable real estate market resulting from government policies is expected to positively contribute to real estate finance and the bank loan market in the first quarter of this year, following the fourth quarter."

This content was produced with the assistance of AI translation services.