[6·17 Real Estate Measures] Incheon Also Designated as Speculative Overheated Zone... Loan Recalled if Existing Housing Not Disposed Within 6 Months

[Asia Economy Reporters Inho Yoo, Chunhee Lee, Hyojin Kim] The government's real estate measures announced on the 17th, targeting so-called 'gap investment'?investing in housing using jeonse as leverage?are being evaluated as unprecedented regulations.

The entire metropolitan area excluding the northern border region, as well as Daejeon and Cheongju, have been designated as regulated areas, with strong regulatory measures including loan restrictions and stricter residency requirements.

◆ Included Incheon in Speculative Overheated Districts = Areas incorporated into the adjusted target areas in the metropolitan region include Incheon (excluding Ganghwa and Ongjin), Goyang, Gunpo, Ansan, Anseong, Bucheon, Siheung, Osan, Pyeongtaek, and Uijeongbu in Gyeonggi Province.

The government initially considered designating the entire metropolitan area excluding border areas as adjusted target areas but excluded northeastern Gyeonggi regions such as Dongducheon, Gapyeong, Yangpyeong, and Yeoju, judging that there was little chance of a balloon effect occurring there.

In the provinces, Daejeon and Cheongju, where housing prices have recently risen significantly, were also designated as adjusted target areas. Existing adjusted target areas including Suwon in Gyeonggi, Sujeong-gu in Seongnam, Anyang, Danwon-gu in Ansan, Guri, Gunpo, Uiwang, Suji and Giheung in Yongin, Dongtan 2 in Hwaseong, Yeonsu-gu, Namdong-gu, and Seo-gu in Incheon, and Dong-gu, Jung-gu, Seo-gu, and Yuseong-gu in Daejeon were also designated as speculative overheated districts.

According to the Korea Real Estate Board, among the existing adjusted target areas, the places showing notable price increases over the past three months were Guri (7.43%), Yeongtong-gu in Suwon (5.95%), and Gwonseon-gu (5.82%). As a result, the number of speculative overheated districts increased to 48, and adjusted target areas to 69.

In adjusted target areas, the loan-to-value ratio (LTV) is set at 50% for houses priced under 900 million KRW and 30% for houses exceeding 900 million KRW, with a debt-to-income ratio (DTI) capped at 50%. Additionally, capital gains tax is increased for multi-homeowners.

In speculative overheated districts, mortgage loans for high-priced houses exceeding 1.5 billion KRW are prohibited, and the LTV for houses over 900 million KRW is set at 20%, among other stringent regulations.

◆ Loan Recall If Existing House Not Sold Within 6 Months = Mortgage and jeonse loan regulations are also significantly tightened. The difficulties for genuine demanders such as low- and middle-income households planning to purchase homes in newly added or expanded regulated areas are expected to increase.

Starting July 1, anyone taking out a mortgage loan to purchase a house in any regulated area must move in within six months regardless of the price. Previously, moving-in obligations were imposed within one year for houses over 900 million KRW in speculative overheated or speculative districts, and within two years in adjusted target areas.

The disposal period for existing houses when a single-homeowner purchases an additional house in the area is also shortened to six months. If the house is not sold within this period, the loan will be immediately recalled.

Jeonse loan guarantees will also face higher thresholds. Currently, restrictions apply only to owners of houses priced over 900 million KRW, but going forward, those who newly purchase houses over 300 million KRW in speculative or speculative overheated districts will also be subject to guarantee restrictions.

Even those who previously received loans will have their jeonse loans recalled immediately if they purchase apartments over 300 million KRW in the designated areas. The Housing and Urban Guarantee Corporation (HUG) will also reduce the guarantee limits. The current jeonse loan guarantee limits of 400 million KRW in the metropolitan area and 320 million KRW in provinces will be significantly lowered to below 200 million KRW.

With the government introducing such stringent additional regulations, the difficulties for genuine demanders such as low- and middle-income households planning to purchase homes are expected to increase further. Due to successive base rate cuts, mortgage loan interest rates have dropped sharply, and those who had been hoping for a chance to buy a home are expected to feel particularly deprived.

The minimum mortgage loan interest rate in the banking sector is expected to fall to the 1% range as early as next month. KB Kookmin Bank, Woori Bank, and NH Nonghyup Bank lowered the variable mortgage loan interest rates (linked to the COFIX) they newly offer by 0.14 percentage points each on the 16th compared to the 15th.