The drop was attributed to a sharp decrease in Seoul and its surrounding area.

New home permits issued in Seoul plunged 26.2 percent on-year, while those issued in the entire capital region, which includes the western port city of Incheon and Gyeonggi Province, tumbled 16.5 percent to some 341,000.

New home construction permits issued in the rest of the country gained 7.9 percent on-year to 384,886.

The government began limiting the supply of new homes, especially new apartments in Seoul, in August as a way of limiting the rise in household debts, which reached a record high of 1,295.8 trillion won (US$1.11 trillion) as of end-September.

The government blamed mortgage loans as a major cause of the increase in household borrowing, and thus insisted it could limit the increase in household debt by taking away reasons to take out fresh mortgage loans.

In the first half of 2016, the number of new home permits issued by the government had spiked 18.4 percent on-year, partly reflecting high demands for new homes.

But in the second half, the number plunged 20.3 percent from the same period in 2015, the ministry said in a press release.

"In 2017, the number of construction permits for new homes is expected to decrease from that of 2016 due to continued concerns over an oversupply and the lack of construction sites with market potential," it said.

The number of groundbreakings also dwindled in 2016, slipping 8.2 percent on-year to some 658,000. (Yonhap)