Mortgages’ relaxed to rouse real estate market
The Ministry of Strategy and Finance announced the policies with related ministries, including the Ministry of Land, Transport and Maritime Affairs and the Financial Services Commission.
The move came at a time when the number of apartments traded dropped in Seoul and Gyeonggi by more than 50 percent from a year ago.
The debt-to-income (DTI) rule, which limits the amount of housing loans based on the borrower’s income, will be relaxed provisionally through March for those who do not own a house or who own only one home. Those who already own a home will have to sell their existing home within two years of the purchase of a new one.
The current DTI rules, however, will remain in force for houses worth over 900 million won ($752,500) or homes located in the three affluent southern Seoul districts, Gangnam, Seocho and Songpa, to prevent a resurgence of speculation.
The changes were made to perk up the real estate market and help low-income families with housing needs, and are designed not to benefit speculators.
“With housing sales contracting severely, people who intend to move in to new houses have difficulties selling their existing homes and the slow real estate market has resulted in a decline in construction jobs,” the finance ministry said in a statement.
Under the existing DTI rules, mortgage payments in most of Seoul cannot exceed 50 percent of a borrower’s annual income. The threshold varies depending on regions, and is 60 percent in Incheon and Gyeonggi and 40 percent for the three southern Seoul districts.
Among other changes, tax waivers that reduce real estate sales taxes will be extended for two more years, and tax exemptions on housing acquisition and registration taxes will be continued one more year.
The government will also decrease the amount of low-cost housing, called Bogeumjari, that can be reserved in advance. This is to prevent potential home buyers from waiting for the low-cost housing and to get them in the normal part of the market. However, the government said the number of homes it promised to build will remain the same. The government said in 2008 it would offer 1.5 million affordable homes for sale or rent by 2018. The government will also provide up to 200 million won in loans through national housing funds for first-time home buyers through March.
By Limb Jae-un [firstname.lastname@example.org]