Dokyu-sang "Real Estate Market 'Dark Clouds'... A Time Requiring High Vigilance (Comprehensive)"

"Thorough Management of Interest Rate Rise Risks... Strengthening Support for Vulnerable Sectors"

Dokyu-sang, Vice Chairman of the Financial Services Commission

[Asia Economy Reporter Kwangho Lee] Do Gyu-sang, Vice Chairman of the Financial Services Commission, stated on the 2nd, "This is a time when a higher level of vigilance is needed more than ever for investments such as real estate."

At the '40th Financial Risk Response Team Meeting' held via video conference that day, Vice Chairman Do said, "We must not ignore experts' warnings that the global monetary easing trend, which has continued for years, is changing, and that truly 'dark clouds' are approaching the real estate market."

Vice Chairman Do emphasized, "If you search for articles exactly 10 years ago in 2011, issues like 'house poor' and 'empty jeonse' appeared as the most serious problems. From the early 2000s until just before the 2008 global crisis, real estate prices soared, but then sharply declined. Those who had taken out excessive loans to invest in housing suffered greatly from falling housing prices and interest burdens. It is a natural truth that bubbles cannot expand endlessly."

He added, "The government will also steadily implement measures to reduce overall economic risks caused by excessive debt," and urged, "The financial sector should use the recent expansion of the borrower-level Debt Service Ratio (DSR) implementation as an opportunity to establish lending practices based on repayment ability."

The government began gradually expanding the scope of DSR application from the 1st. DSR refers to the ratio of total financial loan principal and interest repayments to income. In regulated areas such as Seoul, a DSR of 40% applies when taking out a mortgage loan for a house priced over 600 million KRW or a credit loan exceeding 100 million KRW.

In Seoul, virtually all apartments are subject to DSR regulations. As of February, 83.5% of apartments in Seoul exceeded 600 million KRW. From July next year, DSR regulations will apply if the total loan amount exceeds 200 million KRW. By July 2023, DSR regulations will be fully applied to all borrowers with total loans exceeding 100 million KRW.

Vice Chairman Do also expressed concern, saying, "The dominant view is that cryptocurrencies will be significantly affected by the global monetary tightening situation. In fact, while the cryptocurrency market, which had been soaring, has recently shown a sharp decline, some cryptocurrencies have suddenly halted trading, showing very unstable behavior."

The meeting also reviewed policies related to the post-COVID transition.

Vice Chairman Do said, "The 'Financial Situation Review Working Group' for diagnosing and responding to the COVID crisis level has reached a consensus that, barring unforeseen factors such as variant viruses, the recovery phase will fully begin in the second half of this year. However, for self-employed and small business owners, although some recovery in sales is observed, the prevailing view is that more time is needed to return to pre-COVID levels."

He continued, "The government will provide selective support without fail by supplying management stabilization funds for small business owners, easing the burden of credit rating downgrades, and supporting small business damage relief through supplementary budgets to anticipate the 'liquidity cliff' for vulnerable borrowers whose recovery is slow."

Furthermore, he stated, "So far, credit evaluation results from the banking sector do not show concerning levels of rating downgrades for small and medium-sized enterprises such as small business owners. However, considering that evaluations for small-scale self-employed businesses will begin in earnest this month, we will continuously monitor and respond to the credit evaluation situation in the financial sector."

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