Package of measures aims to boost sagging property market


The government announced Thursday that it would lift restrictions on housing transactions in three up-market Seoul districts ― Gangnam, Seocho and Songpa ― in an effort to stimulate the nation’s real estate market.

The latest package of measures ― the 17th under the current Lee Myung-bak administration ― removes the last of the nation’s “speculation zones.”

In 2003, the most coveted residential area in Seoul was designated an “overheated speculation zone” and restrictions were placed on apartment construction and sales there. It was reclassified as “a speculation zone” late last year.

The Ministry of Land, Transport and Maritime Affaires said that the remaining restrictions on Gangnam would be abolished to facilitate the reconstruction of old apartments and home trading.

“If the previous package announced in December was targeting the overheated rental housing market, the new measures are aimed at easing rules for people who want to purchase a house but feel uncomfortable with the government’s restrictions,” said a Land Ministry official.

The nation’s real estate market, particularly in Seoul and the surrounding areas, has suffered a long slump since 2007 despite government stimulus, dealing a blow to some local builders and development-related investment.

Freeing the three districts from the designation will raise the debt-to-income ratio from the current 40 percent to 50 percent like in other Seoul areas, allowing homebuyers there to borrow more money from banks.

An additional 10 percent in capital gains taxes imposed on multiple homeowners there also will be lifted, while the usual financial benefits for people who purchase their first house will be offered in the area as well.

The ministry also decided to drastically ease restrictions that ban people from trading their exclusive purchase rights for apartments under construction in the Seoul metropolitan area and other limited development districts.

Other measures unveiled on the day included reducing mortgage rates for people who own their first home, providing more rental houses for low-income families and building homes for single-member households.

Experts, however, expected these new measures would have a limited impact as most had already been widely anticipated and reflected within the market.

In order to boost the demand directly, they said the government needs to ease financial regulations or offer tax benefits rather than relaxing housing rules.

The government’s new measures need approval from the National Assembly. The changes will go into effect as soon as they are approved.

By Lee Ji-yoon (jylee@heraldcorp.com)