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Debt policies, U.S. rate hike pull down apartment market transactions

(123RF)
(123RF)


Korean housing market transactions for speculation turned bearish in December, amid toughened household debt control policies, housing oversupply and uncertainties from the U.S. rate hike, municipal government data showed on Sunday.

As of Dec. 18, the apartment market transactions stood at 5,470 deals, accounting for only 55 percent of the monthly transactions in November, according to Seoul Property Information Plaza, a housing market information provider operated by the municipality of Seoul.

Seoul City is expecting the numbers to fall further, as deal cancellation reports are not yet included in these statistics.

“Prospective (property) buyers are holding back investment to observe the potential impact of the toughened household debt assessment and the U.S. rate hike on the local housing market,” said Ham Young-jin, a researcher at housing market info provider Real Estate 114.

The reconstructed apartments in the Gangnam District area, the cherry of the apartment market with high demand from property investors and speculators, lowered the parcel-out prices by several tens of million won, yet with little offers from the buyers.

Properties in the surrounding Gangnam area, including the old apartments in Songpa District and the reconstructed apartments in Gangdong District, also reported slumping deals after the financial regulators pushed lenders to require higher rate of principal repayment.

Although the Bank of Korea froze the key interest rate at a record-low 1.50 percent for sixth consecutive months, the property market slowdown intensified after government pressured banks to toughen borrowing requirements and push ahead the principal repayment period. According to central bank data, the country’s total household debt stood at an all-time high of 1,166 trillion won as of September, expected to surpass the 1,200 mark within the year.

Group loans for apartments also shrank, following the Financial Supervisory Service’s solidity crackdown on the country’s major lenders, earlier in October. The financial watchdog executed investigations into major banks and large-scale regional lenders, with a focus on the soundness of the lenders’ loan evaluation and risk management.

The government’s announcement to increase supply of rental homes also fueled the wait-and-see strategy for property buyers. Last week, Finance Minister Choi Kyung-hwan said some 100,000 hectares of land, currently bound to farming use only, will become free to be used as residential areas, estimating a fresh supply of 50,000 rental homes.

Property experts also expected that the financial uncertainties, triggered by the interest rate hike by the U.S. Federal Reserve, is also making the investors cautious. The rate hike in the U.S. is expected to raise the interest rates here eventually, with only a matter of time and magnitude, they said.

By Chung Joo-won (joowonc@heraldcorp.com)



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