Hong Ik-pyo “LTV 90% Relaxation? Must Reflect Reality of Household Debt Exceeding 100% of GDP... Could Be Burdensome”

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[Asia Economy Reporter Koo Chae-eun] Hong Ik-pyo, a member of the Democratic Party of Korea (former Policy Committee Chairman), expressed his opinion on the 90% Loan-to-Value (LTV) ratio relaxation mentioned by party leader Song Young-gil, stating that it "could be somewhat burdensome" in light of household debt concerns.

On the same day, Hong appeared on KBS Radio's 'Choi Kyung-young's Strong Current Affairs' and, prefacing his remarks as personal opinion regarding the 'LTV 90% relaxation theory,' pointed out, "There was a mortgage crisis in the U.S. in 2008. It became problematic due to excessive debt, and in our country, household debt exceeds 1,700 trillion won, reaching 102% of GDP." He added, "The OECD average is around 85%, and even when factoring in jeonse loans, there is about a 10% gap." He emphasized that even if LTV relaxation is implemented, a sudden and drastic adjustment would be difficult, and the relatively high household debt level compared to overseas countries must be taken into account.

Regarding property tax adjustments, he said, "Last year, property tax rates were adjusted, so for official land prices under 600 million won, taxes have already decreased, but the 600 million to 900 million won range remains unchanged, causing the tax rate to rise up to the 30% cap. Therefore, there might be a need to adjust the tax rates." He also noted, "Opinions on the comprehensive real estate holding tax (종부세, Jongbu-se) are quite divided, so it is necessary to listen to the views of various stakeholders."

He added, "(Personally,) I think the official land price should remain as is, but since the official land price is approaching market price, various taxes imposed accordingly or regional medical insurance fees might increase in tandem. Therefore, it might be necessary to appropriately adjust the tax rates accordingly."

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