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Korea further strengthens housing market regulations

The government announced a fresh set of regulations Tuesday to cool down the overheated housing market, a month after adopting strong measures for Seoul and other cities.

On Aug. 2, the Ministry of Land, Infrastructure and Transport designated 25 regions in Seoul and two other cities as "overheated speculative districts" to tighten mortgage rules and restrict transactions of new homes. This action is seen to have curbed price hikes over the past month.

Under the follow-up measure, the ministry tightened controls on two affluent districts -- Bundang, just south of Seoul, and Suseong-gu in the southeastern city of Daegu -- as their weekly housing prices rose an average of 0.3 percent in the fifth week of August. The ministry saw this rise as "abnormal." 

Closely packed apartment buildings in Bundang, an affluent region south of Seoul, on Aug. 5, 2017 (Yonhap)
Closely packed apartment buildings in Bundang, an affluent region south of Seoul, on Aug. 5, 2017 (Yonhap)

"We have additionally designated speculative districts, as housing prices in the cited regions have been moving up despite the Aug. 2 measures," Park Sun-ho, a senior ministry official, said. "We will promptly adopt the follow-up measures to stabilize the housing market and strengthen market monitoring."

The government also plans to ease qualifications for the home price-cap system for new apartments whose sale prices exceed what is deemed normal. The new policy will take effect as early as next month, the ministry said. 

The previous measures reined in mortgage loans to more strictly match borrowers' income and the value of collateral real estate. It also restricted the reselling of the purchase rights of new apartments, which market watchers cited as a major factor fueling price rises.

Multiple-home owners will be forced to pay a higher capital gains tax when they sell their houses.

Since taking office in May, President Moon Jae-in has vowed to rein in the housing market as speculative forces have been blamed for driving up home prices amid rising concerns over snowballing household debt.

South Korea's household debt reached a record high of 1,359.7 trillion won ($1.2 trillion) at the end of the first quarter, according to data compiled by the Bank of Korea. (Yonhap)