Raised Loan Thresholds, but Housing Price Stability Remains 'Uncertain'

[Asia Economy Reporter Yoo In-ho] Loan regulations for Suwon, Anyang, Uiwang in Gyeonggi Province, which were included in the adjusted target areas under the 'February 20 Real Estate Measures,' will be applied starting from the 2nd.

Despite the announcement of the measures, the housing price increase trend in the affected areas continues, and new terms such as 'An·Si·Seong (Ansan·Siheung·Hwaseong),' 'Kim·Bu·Geom (Gimpo·Bucheon·Geomdan),' 'Nam·San·Gwang (Namyangju·Sanbon·Gwangmyeong),' and 'O·Dong·Pyeong (Osan·Dongtan·Pyeongtaek)' have emerged due to the balloon effect, leading to forecasts that the effect of the measures will be short-lived.

According to the industry and financial sectors on the 2nd, loan regulations for the newly designated adjusted target areas under the February 20 measures, including Yeongtong-gu, Gwonseon-gu, and Jangan-gu in Suwon City, Manan-gu in Anyang City, and Uiwang City, have been significantly strengthened starting today.

The key point is that the Loan-to-Value ratio (LTV) for mortgage loans, which was applied at 60% regardless of housing price, has been lowered to 50%, and 30% is applied to the portion exceeding 900 million KRW. For example, when purchasing a 1 billion KRW house within the adjusted target area, previously, a loan of up to 600 million KRW (60% of the house price) was possible, but now the loanable amount is reduced to 480 million KRW (900 million KRW × 50% + 100 million KRW × 30%).

Additionally, households with one house in the adjusted target areas must dispose of their existing house within two years to receive a mortgage loan and must move into the new house. Mortgage loans for house purchases by business operators in industries other than housing rental or housing sales are also prohibited.

However, confusion is expected at commercial bank counters as loan regulations become more complex. The commercial banks' computer systems have not yet fully applied the loan regulations changed by the February 20 measures, leading to anticipated confusion.

Experts point out that this is a recurring issue whenever real estate measures are announced under the Moon Jae-in administration, such as the August 2, 2017 measures, September 13, 2018 measures, December 16, 2019 measures, and February 20, 2020 measures.

Moreover, all five newly designated adjusted target areas under the February 20 measures were hardly affected by the regulations. According to the Korea Real Estate Board, as of the 24th of last month, the increase rate in Jangan-gu, Suwon (1.36%) and Uiwang rose compared to the previous week, and although the increase rate in Gwonseon-gu (1.58%) and Yeongtong-gu (1.54%) in Suwon and Dongan-gu in Anyang (0.4%) slowed down, the upward trend in housing prices continues.

Liquidity is moving to areas that escaped government regulations. In Incheon, the increase rate expanded from 0.42% to 0.44% during the same period. Yeonsu-gu, where Songdo New City is located, surged by 1.06%. Daejeon, which was considered a candidate for the adjusted target area but was excluded, also saw its increase rate expand from 0.53% to 0.75%. Sejong (1.52%) recorded the highest apartment price increase nationwide.

An industry official said, "As the peak spring season begins in earnest, the balloon effect is likely to spread further," adding, "While the February 20 measures may temporarily slow the housing price increase in the regulated areas, there will be little long-term impact."

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