Financial Services Commission Begins Daily and Regional Monitoring After Lifting of Land Transaction Permit Zone

Financial Services Commission to Monitor Household Loans Monthly and Quarterly
Banks to Manage Daily Figures Internally
Gangnam Home Prices Rise After Lifting of "Toheoje"
March Loan Growth Unlikely to Be Significant

Following the lifting of the Land Transaction Permit Zone (Toheoguyeok) designation, apartment sale prices in the three Gangnam districts (Gangnam, Seocho, and Songpa) have seen the largest increases. At the same time, financial authorities have been confirmed to be monitoring household debt trends more closely, now on a daily basis. They also plan to analyze household loan trends by major regions within Seoul in greater detail. However, both inside and outside the financial authorities, it is expected that the increase in household debt for March will not be as significant as market concerns suggest.

According to financial authorities on March 17, the Financial Services Commission is monitoring household debt figures from the banking sector on a daily basis. Furthermore, they are checking transactions by key regions to assess the impact of the lifting of the Land Transaction Permit Zone on household loan demand.

An official from the financial authorities stated, "Internally, we are checking the trend of household loans in the banking sector daily and reviewing them on a weekly basis. In addition, we have decided to further subdivide and monitor the trends in new mortgage loans by region for the time being."

According to the "February Household Debt Trends" report released earlier by the Financial Services Commission, household debt across all financial sectors increased by 4.3 trillion won in February compared to the previous month. As household loans in the financial sector resumed in earnest from February and seasonal moving demand for the new school term overlapped, this marked the largest increase in three months since November last year (5 trillion won).

Mortgage loans across all financial sectors increased by 5 trillion won compared to January. In the banking sector, the increase was 3.5 trillion won, a significant jump from the previous month (1.7 trillion won). In contrast, the increase in the secondary financial sector was 1.5 trillion won, similar to the previous month.

The surge in loans has been attributed to the lifting of the Toheoguyeok designation. On February 12, the Seoul Metropolitan Government lifted the Land Transaction Permit Zone designation for 291 out of 305 apartments located in Jamsil, Samseong, Daechi, and Cheongdam. Since then, apartment sale prices in the Gangnam area have been on the rise.

According to the "Weekly Apartment Price Trends Nationwide for the Second Week of March (as of March 10)" released by the Korea Real Estate Board, as of March 10, apartment sale prices in Seoul rose by 0.2%. In particular, apartment sale prices in Songpa District increased by 0.72% compared to the previous week, marking the largest increase in 7 years and 1 month since the first week of February 2018 (0.76%).

Gangnam District (0.69%) and Seocho District (0.62%) also saw their highest increases in about 7 years. The rise in home prices is now spreading to the Mapo, Yongsan, and Seongdong areas.

However, some analysts believe that household loans in March will not increase as much as the market fears. This is because it is difficult to say that the lifting of the Toheoguyeok designation has been fully reflected in household loans yet.

An official from the financial authorities said, "It takes one to two months from household loan consultation to the actual loan being finalized. Since we monitor loan figures on a daily, weekly, and monthly basis, we do not expect the increase in loans in March to surge unexpectedly."

Kim Youngdo, a research fellow at the Korea Institute of Finance, also stated, "It is true that Gangnam real estate prices are rising after the lifting of the Toheoguyeok designation, but the issue of unsold apartments in provincial areas remains serious. Since the government has said it may reconsider the designation of Land Transaction Permit Zones, we need to keep a close eye on household debt trends."