Policy makers have stepped up plans to stimulate the real estate market and entice more buyers after the country registered tentative demands and want to prevent further wavering domestic growth.
The debt-to income ratio, which monitors the type of mortgage loan imposed by banks, is due to be incremented to meet the needs of borrowers, amid aims to boost the local housing market.
The moves come after the central bank cut its benchmark interest rate for the first time in more than three years on 12 July, in retaliation to EU monetary concerns, stagnant growth in employment in the US and overall economic slowdown in neighbouring China.
According to figures published by Bloomberg from the Ministry of Land, Transport and Maritime Affairs, property purchases fell 38 percent in Seoul in the January-April months, from the same time period last year. Home prices have also dropped 0.7 percent in the first half of 2012.
An adviser to Lee Myung Bak, South Korea’s president, addressed reporters at a press conference in Seoul yesterday, saying they had seen “many irrational aspects” to the ratio limit imposed by the central bank that effect borrowers. “While we maintain the basic framework of the regulation, we concluded that certain irrational parts of the rule should be eased,” vice-minister Kim Dae Ki said. “We don’t want to further raise the burden for mortgage holders as a result of falling real-estate prices.”
In a statement released by the presidential office, the government said “it will also seek for ways to ease increased burdens of loan borrowers stemming from declines of housing prices.”
The South Korean Finance Ministry said they will detail the specifics of the measures as soon as possible.