FSC boss vows tougher fight to curb debt
The comment came after some analysts said the government’s measure will have little impact as long as the real estate market, which has been sluggish in recent years, hums along, especially with redevelopment of apartment complexes in Gangnam. Some said stronger measures were needed.
“[The FSC] will execute the plan that was recently announced,” Yim said Monday during a meeting of the finance industry reform committee held in Yeouido, southwestern Seoul.. “Then we will dispassionately assess the outcome and correct the plan [if there are any problems].”
The FSC chairman, however, acknowledged critics’ view that more should have been done.
“I know that the market was disappointed because they expected controls on mortgages,” he said, “But the latest measures are aimed at addressing a fundamental cause of the rise in group loans by controlling the supply of new residential units.”
The measures announced Thursday included tougher credit evaluations on people borrowing group mortgages or syndicated loans, which has risen significantly.
Syndicated loans are taken out by a group of borrowers buying newly built or redeveloped apartments. Financial institutions offer lower interest rates than on individual mortgages. The credit evaluation process is less restrictive.
Such loans only accounted for 12.4 percent of mortgages issued at the end of last year. Now they account for 49.2 percent and total 11.6 trillion won ($10.3 billion).
Household debt including credit card debt now stands at over 1,257.3 trillion won, an all-time record. Analysts project that at the current pace, the figure will exceed 1,300 trillion won by the end of the year.
“As the household debt management measures were mostly made from the macroeconomic standpoint, it won’t have a huge impact in contracting the real estate market in the second half,” said Kim Min-young, a Budongsan 114 researcher.
The real estate market shows little signs of cooling off.
According to a real estate information provider, the price of residential units sold in Seoul last week rose 0.19 percent compared to the previous week. That was the same weekly increase as the last week of June, which was the sharpest weekly growth so far this year.
The rise in prices were particularly seen in redeveloped apartments in Gangnam including Gaepo Jugo 3 Danji. In fact, redeveloped apartment prices rose 0.41 percent compared to the previous week.
A survey by the Bank of Korea showed that real estate analysts expect the current momentum to continue until the first half of next year. The disparity between the real estate markets in greater Seoul and provincial areas is expected to widen.
In a survey of 94 real estate analysts, 68 percent said the redeveloped apartment price in the greater Seoul area will likely see an additional hike, with 52 percent saying the prices will increase between 1 and 3 percent. Additionally 31 percent speculated that these apartment prices will likely see an increase of more than 3 percent. That’s a stark contrast to experts saying that the national average real estate price will increase less than 3 percent.
The survey also showed that 47 percent believe the current upswing in the prices of redeveloped apartments in the greater Seoul area to continue until the first half while 21 percent believed that it will continue until the second half of next year. Only 31 percent said this momentum will run out of steam at the end of this year.
More than 60 percent expect the provincial real estate markets to slow especially in both Gyeongsang provinces as well as in Chungcheong and Jeolla.
The survey was conducted between July 19 through Aug. 9 and doesn’t reflect the government measures announced last week.
BY LEE HO-JEONG, PARK EUN-JEE [email@example.com]
with the Korea JoongAng Daily
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