Loan Regulation Easing Plan for Domestic First-Time Buyers Expected... 20%p Increase in LTV Benefits

Housing Price and Income Criteria Also Raised
However, Effectiveness of DSR Regulations Faces Controversy

The top capital gains tax rate on housing will be increased to 75% starting from the 1st of next month. The taxpayers subject to property tax and comprehensive real estate tax will also be finalized as of that date. However, the property tax rate has not been finalized due to the legislative amendment process, and the comprehensive real estate tax rate is still under further discussion. The photo shows the view of apartments in the Gangnam area from the Lotte World Tower Sky Observatory in Songpa-gu, Seoul. Photo by Dongju Yoon doso7@

[Asia Economy Reporter Kim Jin-ho] The ruling party, government, and Blue House are discussing a 'loan regulation relaxation plan' for actual demanders such as young people and newlyweds. The Democratic Party of Korea and financial authorities are expected to officially announce measures to increase the preferential rate of loan-to-value ratio (LTV) by 20% as early as next week.

According to the financial sector on the 30th, the Financial Services Commission is coordinating details such as the implementation timing of the 'Housing Market Stabilization Plan' announced by the Democratic Party of Korea's Real Estate Special Committee on the 27th. The housing market stabilization plan announced by the ruling party focuses on helping actual demanders such as those without homes to purchase their own homes.

First, for actual demanders, the preferential rate of LTV applied when receiving a mortgage loan (Judaemae) was increased from the existing 10 percentage points to 20 percentage points. In speculative and overheated districts, the LTV limit is raised from the basic 40% to 60% by adding 20 percentage points. In adjusted areas, 70% is applied by adding 20 percentage points to the basic 50%.

The housing price criteria were also raised from 600 million KRW to 900 million KRW for speculative and overheated districts, and from 500 million KRW to 800 million KRW for adjusted areas. The income criteria were increased from a combined 80 million KRW for couples to 90 million KRW, and for first-time buyers from 90 million KRW to 100 million KRW, allowing more non-homeowners to benefit. However, the maximum loan limit is within 400 million KRW, and the individual total debt service ratio (DSR) is applied.

Applying the improvement plan, when purchasing a 480 million KRW house in speculative and overheated districts such as Seoul, an LTV of 60% is applied, allowing a loan of 288 million KRW. Compared to the existing LTV of 50% (240 million KRW), the loan limit increases by 48 million KRW. When purchasing an 800 million KRW house, a loan up to the maximum limit of 400 million KRW is possible. Under the current standard (LTV 40%), the loan amount would be limited to 320 million KRW.

However, contrary to the expectations of the Democratic Party and the government, some actual demanders remain dissatisfied. This is because there is a difference between the LTV limit and the actual loan limit that can be received. The maximum loan limit is restricted within 400 million KRW, which is the borrower-level DSR limit, so when buying a 900 million KRW apartment, the loan limit only increases by 40 million KRW.

Regarding this, real estate communities continue to criticize the policy as a 'token gesture' because although the housing price criteria have been raised, strict loan regulations (DSR) remain.

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