[2·20 Real Estate Measures] LTV Reduction... 1 Billion Won Apartment Loan from 600 Million to 480 Million

Due to the impact of the December 16 real estate measures, the decline in apartment prices in the Gangnam area has deepened, creating an atmosphere where Seoul apartment prices are expected to stabilize soon. Meanwhile, in some metropolitan areas such as Paldal and Gwonseon in Suwon and Yongin, apartment prices are rising sharply, driven by transportation benefits and the balloon effect of the December 16 measures. [Image source=Yonhap News]

[Asia Economy Reporter Onyu Lim] Starting from March 2, when purchasing an apartment worth 1 billion KRW in regulated areas including Gwacheon, Suwon, and Seongnam, the mortgage loan limit will be significantly reduced from 600 million KRW to 480 million KRW. This move comes as the government has introduced the 'LTV ratio reduction in regulated areas' card to stabilize the housing market.

The government recently announced real estate measures to block speculative demand in the Seoul metropolitan area, where housing prices have surged rapidly. Additionally, the government decided to newly designate Yeongtong-gu, Gwonseon-gu, and Jangan-gu in Suwon City, Manan-gu in Anyang City, and Uiwang City as regulated areas due to continued market instability following the December 16 measures and the rapid rise in housing prices.

Going forward, mortgage loan regulations will be strengthened in regulated areas. Until now, a loan-to-value ratio (LTV) of 60% has been applied regardless of housing price in regulated areas. However, from March 2, the LTV will be applied differentially: 50% for the portion up to 900 million KRW and 30% for the portion exceeding 900 million KRW.

However, to avoid restricting genuine homebuyers, those who meet all of the following conditions: 1) non-homeowner household head, 2) housing price below 500 million KRW, and 3) combined annual income of the couple below 60 million KRW (below 70 million KRW for first-time buyers), classified as 'low-income and genuine demand buyers,' will continue to receive the current LTV of 60%. For support products aimed at low-income genuine buyers, such as Didimdol loans and Bogeumjari loans, the LTV regulation ratio will be maintained at a maximum of 70%.

The government also plans to strengthen regulations on business loans for housing purchase purposes. Currently, mortgage loans for housing purchase are prohibited for businesses other than housing rental and housing sales businesses in speculative areas and speculative overheating districts, and this restriction will be extended to regulated areas.

The genuine demand requirements for mortgage loans for one-home households in regulated areas will also be strengthened. Currently, one-home households in regulated areas can obtain mortgage loans on the condition of disposing of their existing home within two years. However, going forward, they must fulfill not only the disposal of the existing home within two years but also the obligation to move into the new home.

The designation of new regulated areas will take effect from the 21st of this month, but mortgage loan regulations will be implemented from March 2. Kim Heung-jin, Director of Housing Policy at the Ministry of Land, Infrastructure and Transport, explained, "Financial regulations require time for bank counter education and system preparation, so they cannot be implemented immediately and will start from the first week of March."