Credit: Public domain.
Liberal administrations from Roh Moo-hyun 노무현 to Moon Jae-in 문재인 knew well that real estate can make or break a presidential administration. Now it is newly elected president Lee Jae-myung 이재명’s turn to try his hand at taming South Korea’s soaring cost of housing.
On June 27, the administration announced its first real estate policy, consisting of a dramatic restriction of mortgage loans. In the Seoul metropolitan area, the amount of a mortgage loan is capped at KRW 600m (USD 445k). Owners of more than one house cannot obtain a new mortgage loan, and any new mortgage loan holder must move into the purchased home within six months - effectively prohibiting the popular investment technique of borrowing money to buy a house, then immediately renting it out to pay the mortgage.
Previous liberal administrations attempted to control housing costs by raising taxes or building more housing. In contrast, the Lee administration is pursuing a strategy of focusing entirely on controlling the flow of funds going into the housing market, as it did not announce any plans regarding housing supply or taxes. The Financial Services Commission 금융위원회 had projected household debt to grow by KRW 75t (USD 55.6b) this year; with the newly announced real estate policy, the FSC is aiming to stem the growth to KRW 50t.