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Tougher Housing Loan Rules Hurting Transactions

Posted September. 07, 2009 08:27,   


In the wake of the planned extension of stricter rules on mortgage loans throughout the Seoul metropolitan area, the property market is showing signs of slowing. Purchase inquiries are decreasing, and home sellers are lowering their asking prices.

Real estate industry sources yesterday said home sellers are taking a wait-and-see attitude ahead of the introduction of the stricter rules. People who had applied for bank loans to buy rather than rent homes are now balking at purchases.

“After the government announced measures to restrict the debt-to-income ratio Saturday, the number of purchase inquiries dropped significantly, making home sellers feel uneasy,” said Kim Hee-jong, a real estate agent in northern Seoul.

“In particular, double income earners who wanted to buy homes with mortgage loans amid rising rents are at a loss over what to do.”

Another real estate agent said people who were considering buying new homes rather than paying higher rents are sighing over the regulations.

In the northern Seoul suburb of Goyang, a real estate agent said the self-employed with irregular incomes and housewives who do not work are even more perplexed. “There have been few property deals lately because of the rise in asking prices, and such transactions are likely to be further dampened by rules on the debt-to-income ratio,” the agent said.

Seoul’s southern districts are also suffering from the stricter regulations. While the speculation-prone districts of Gangnam, Seocho and Songpa remain unaffected, other nearby areas are seeing a plunge in transactions.

One agent in southern Seoul said purchase inquiries have dropped more than 30 percent, adding sellers in northern Seoul or southern suburbs are worried that their homes will not be sold for the time being. Experts predict that the property market will likely remain sluggish for a while, as buyers are expecting prices to fall.

Another factor dampening housing transactions is tax audits on the financial sources of those who buy rebuilt apartments in southern Seoul. An agent said those who have sufficient cash are not affected by the regulations, but are discouraged by the audits into the sources of their funds.

aryssong@donga.com hyejin@donga.com