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Meeting on Stimulating Real Estate Market Set for Thur.

Posted July. 20, 2010 16:30,   


President Lee Myung-bak will hold an emergency economic meeting Thursday on stimulating the sluggish real estate market.

Key measures will include easing rules on mortgage loans, including a cap on the debt-to-income ratio.

Financial authorities remain negative over loosening the debt-to-income ratio, but Strategy and Finance Minister Yoon Jeung-hyun hinted Monday at easing housing regulations. “Property measures could change depending upon a shift in the overall environment,” he said.

The government’s dilemma is whether to revive real estate transactions while preventing housing inflation at the same time.

○ Easing debt-to-income ratio

Apartment prices in Seoul have dropped for the fifth straight month and Seoul`s real estate prices have also declined for the first time in 15 months, the Land, Transport and Maritime Affairs Ministry said Monday.

Land prices nationwide rose 0.05 percent last month from May, but the pace continued to slow. In particular, land prices in Seoul fell 0.03 percent in their first drop since March last year.

Districts in Seoul’s southern districts led the decline, with Seocho and Songpa falling 0.04 percent and Gangnam 0.12 percent.

Transaction volume also plunged. Land transactions covered 183,345 lots over 195 million square meters last month, down 14.7 percent and 20.1 percent, respectively, from the same month a year ago. This is 20.3 percent lower than the monthly average for June over the past five years.

With the situation worsening, the ruling Grand National Party is also urging government action. “The Land, Transport and Maritime Affairs Ministry will soon announce measures to revitalize the real estate market. I hope it comes up with groundbreaking measures.” said Ko Heung-gil, chairman of the party’s policy committee, in a meeting of the party`s supreme council Monday.

While the ministry is discussing the matter with the Strategy and Finance Ministry and the Financial Supervisory Commission, the key issue is if the measures will include easing loan regulations.

A fierce debate is expected given the vast differences of opinion, with proponents of easing regulations saying the move will stimulate transactions while opponents warning of further raising high household debts.

redfoot@donga.com rews@donga.com