Concern over conflicting comments from nomineeConflicting remarks by the finance minister nominee, Yoo Il-ho, on the housing market and household debt are creating controversy.
Yoo told reporters on Monday night that the housing market hasn’t yet reached oversupply. “[The housing market] wouldn’t be in oversupply,” Yoo said. “And there is no need to be cautious about it.”
However, Minister of Land, Infrastructure and Transport Kang Ho-in said in his inauguration speech last month that there are signs of an oversupply. “Some are worried about oversupply, and there seems to be heated competition in the presales of new apartments,” Kang said.
Kang said that new apartments that have been approved for construction this year might lead to an oversupply around 2017.
Since Yoo and Kang will have to coordinate housing policies after the nomination is confirmed, such contrasting views trigger questions about how the new economy chief will deal with the housing market.
Yoo also dismissed concerns about the household debt issue, saying the financial authority has made appropriate measures that will help curb debt growth.
“It is true that surges in mortgages spiked the total household debt,” Yoo said. “But the financial authority has come up with measures, and the total amount won’t rise further.”
However, Yim Jong-yong, chairman of the Financial Services Commission, has emphasized the seriousness of the household debt problem.
Announcing his plan to manage the debt risk in June, Yim said, “There are possibilities of the current household debt continuing to grow.”
The Financial Services Commission came up with stricter rules for screening borrowers’ financial abilities from February, with a goal of slowing the current growth pace.
As the U.S. Federal Reserve has begun to raise its interest rate, the two biggest challenges for the Korean economy will be the property market and household debt problem. Because of the loosened debt-to-income and loan-to-value ratios this year, many Koreans bought residences with loans.
Mortgages borrowed from commercial banks totaled 383.7 trillion won ($326.1 billion) in the third quarter, which account for more than 70 percent of the entire 780.6 trillion won debt borrowed from commercial banks. Due to increased mortgage issuances, total household debt hit 1,166 trillion won as of September.
Yoo was involved in easing the financial regulations for housing as he served as the minister of land, infrastructure and transport from March to November. Initially, Yoo was not considered as the nominee as he planned to run in the general election in April.
BY SONG SU-HYUN [email@example.com]