Decline comes as economy chalks up quarterly growth of 1.5%
(SEOUL) South Korea's construction industry had its biggest annual contraction since at least 2008 in the second quarter, deepening a dilemma for policymakers faced at the same time with a sustained expansion in the broader economy.
Construction shrank 0.8 per cent over the three months through June compared with the prior quarter, the third drop in four quarters, and 0.5 per cent from a year ago, according to gross domestic product (GDP) data released yesterday by the Bank of Korea.
The decline contrasts with a quarterly growth rate for GDP of 1.5 per cent, which bolstered the case for the central bank to continue raising interest rates.
Concern about economy-wide inflation pressures outweighed risks from falling house prices when the bank increased its benchmark this month to 2.25 per cent from a record low 2 per cent.
'Policymakers can't stop raising interest rates just because the construction sector is in trouble, which was already doing badly when rates were at a record low,' said Lee Sung Kwon, an economist at Shinhan Investment Corp in Seoul.
'The government is seeking measures to support the industry, but it'll be difficult to find a good solution unless homebuyers' sentiment improves.'
The 36-member Korea Construction Index of stocks fell 0.4 per cent yesterday after the data were released, compared with a 0.6 per cent gain in the benchmark Kospi index. The building gauge has tumbled 18 per cent this year, while the Kospi has risen 5.1 per cent.
The government is contemplating steps to boost the property market after home prices in Seoul fell for three straight months through June, according to data from Kookmin Bank, the nation's largest lender.
The administration of South Korean President Lee Myung-bak, who suffered an unexpected reversal at local elections on June 2, last week delayed announcing the property policy after officials failed to reach agreement on the proposals.
Land Minister Chung Jong Hwan said on July 21 that he doesn't plan to loosen mortgage-lending controls for now, while Finance Minister Yoon Jeung Hyun said that the nation's property prices are unlikely to fall sharply.
'The property market has emerged as a major political concern,' Park Sang Hyun, chief economist at HI Investment & Securities Co in Seoul, said last week.
South Korea tightened restrictions on mortgage lending last year to slow loan growth. Banks can extend as much as 50 per cent of a borrower's annual income for purchases of homes in Seoul and 60 per cent for areas outside the capital.
The quarterly gain in GDP reported yesterday exceeded the 1.3 per cent median forecast in a Bloomberg News survey of seven economists. From a year earlier, GDP rose 7.2 per cent.
The growth figures raise the risk of the Bank of Korea boosting rates twice more by year-end, Barclays Capital analysts said yesterday as they increased their 2010 GDP growth projections to 6.1 per cent from 5.7 per cent. -- Bloomberg
Source: Business Times, 27 Jul 2010
Showing posts with label overseas property - Korea. Show all posts
Showing posts with label overseas property - Korea. Show all posts
Tuesday, July 27, 2010
Thursday, July 22, 2010
Seoul defers move to boost property market
Authorities fail to agree on whether to ease curbs on mortgage lending
(SEOUL) South Korea yesterday put on hold a plan to announce measures aimed at boosting the property market, as policymakers were unable to reach an agreement on whether to ease mortgage lending restrictions.
The cautious attitude comes in the face of widespread concern that eased mortgage lending rules could spark a property price bubble and sharply lift already heavy household debt.
The Land Ministry said on Monday that it would announce today ways to boost home transactions, which have been sluggish as household income has been slow to recover despite a fast pick-up in economic growth.
'We agreed to reach a conclusion on the measures after continuing discussions,' Land, Transport and Maritime Affairs Minister Chung Jong-hwan told reporters after a meeting with other economic and financial policymakers.
He did not say when the measures would be announced.
Housing prices have risen from a year earlier but sale transactions have been shrinking, partly because of strict restrictions on mortgage borrowing imposed in recent years.
The presidential office said in a statement that ministers would continue discussions without binding themselves to a specific date for an announcement, indicating President Lee Myung-bak wanted the government to give the matter more thorough consideration.
The government is seeking a way to prevent the property market from cooling and denting the still- nascent recovery in consumer spending without sparking a housing price bubble and mortgage borrowing frenzy.
Citing government sources, state-run KBS television reported that the ministry wanted regulations on mortgage lending eased while the Finance Ministry and the Financial Services Commission were opposed.
Analysts said the delayed announcement would not seriously hurt the government's credibility because there was a broad consensus among South Koreans that the government could not be overly careful in handling property policy.
'It's true that the government appears very careful in deciding on key measures, but it is not fair to link the delay directly to the government's credibility,' said Kwon Soon-woo, chief economist at Samsung Economic Research Institute.
South Korean households have debt totalling two-thirds of the country's annual gross domestic product and the financial authorities are concerned because the debt has continued to expand faster than income growth. -- Reuters
Source: Business Times, 22 Jul 2010
(SEOUL) South Korea yesterday put on hold a plan to announce measures aimed at boosting the property market, as policymakers were unable to reach an agreement on whether to ease mortgage lending restrictions.
The cautious attitude comes in the face of widespread concern that eased mortgage lending rules could spark a property price bubble and sharply lift already heavy household debt.
The Land Ministry said on Monday that it would announce today ways to boost home transactions, which have been sluggish as household income has been slow to recover despite a fast pick-up in economic growth.
'We agreed to reach a conclusion on the measures after continuing discussions,' Land, Transport and Maritime Affairs Minister Chung Jong-hwan told reporters after a meeting with other economic and financial policymakers.
He did not say when the measures would be announced.
Housing prices have risen from a year earlier but sale transactions have been shrinking, partly because of strict restrictions on mortgage borrowing imposed in recent years.
The presidential office said in a statement that ministers would continue discussions without binding themselves to a specific date for an announcement, indicating President Lee Myung-bak wanted the government to give the matter more thorough consideration.
The government is seeking a way to prevent the property market from cooling and denting the still- nascent recovery in consumer spending without sparking a housing price bubble and mortgage borrowing frenzy.
Citing government sources, state-run KBS television reported that the ministry wanted regulations on mortgage lending eased while the Finance Ministry and the Financial Services Commission were opposed.
Analysts said the delayed announcement would not seriously hurt the government's credibility because there was a broad consensus among South Koreans that the government could not be overly careful in handling property policy.
'It's true that the government appears very careful in deciding on key measures, but it is not fair to link the delay directly to the government's credibility,' said Kwon Soon-woo, chief economist at Samsung Economic Research Institute.
South Korean households have debt totalling two-thirds of the country's annual gross domestic product and the financial authorities are concerned because the debt has continued to expand faster than income growth. -- Reuters
Source: Business Times, 22 Jul 2010
Tuesday, July 20, 2010
S Korea to unveil housing market steps on Thurs
(SEOUL) South Korea said yesterday it will unveil measures aimed at boosting housing transactions on Thursday, sending shares of home builders higher.
The Ministry of Land, Transport and Maritime Affairs confirmed measures aimed at 'normalising housing transactions' would be discussed at a weekly emergency economic meeting to be chaired by the president on Thursday.
House prices have been rising over a year but sales transactions have been shrinking partly because of strict restrictions on mortgage borrowings imposed in recent years.
Ko Heung-kil, the chief of the ruling Grand National Party's policy committee, told a meeting of senior party members earlier in the day that the government was preparing to announce measures aimed at boosting home transactions.
Mr Ko's comments had sent the construction industry sub-index 2.9 per cent higher, even as the the broader index fell 0.4 per cent.
It was not clear if the measures would be aimed at helping boosting sales transactions of existing homes or new homes or both.
Apartment prices across South Korea set their first weekly fall in 16 months last week, data from the country's largest lender, Kookmin Bank, showed on Friday.
Home prices grew 3 per cent in June from a year earlier, above the annual consumer inflation rate of 2.6 per cent for the month but slowing for a second consecutive month, Kookmin Bank data showed.
But an index from the bank that measures activity in home transactions fell last month to an 18-month low of 0.2 from 0.3 in May and from as high as 1.3 set in September 2009.
South Korea has on several occasions imposed strict limits on the maximum amount of mortgage loans that home owners can borrow on the basis of the market prices of the homes or borrowers' annual income.
Local media and some politicians have demanded the restrictions be eased, but financial authorities have repeatedly said they would not loosen them drastically, mainly out of fear that already high household borrowing could flare up again. -- Reuters
Source: Business Times, 20 Jul 2010
The Ministry of Land, Transport and Maritime Affairs confirmed measures aimed at 'normalising housing transactions' would be discussed at a weekly emergency economic meeting to be chaired by the president on Thursday.
House prices have been rising over a year but sales transactions have been shrinking partly because of strict restrictions on mortgage borrowings imposed in recent years.
Ko Heung-kil, the chief of the ruling Grand National Party's policy committee, told a meeting of senior party members earlier in the day that the government was preparing to announce measures aimed at boosting home transactions.
Mr Ko's comments had sent the construction industry sub-index 2.9 per cent higher, even as the the broader index fell 0.4 per cent.
It was not clear if the measures would be aimed at helping boosting sales transactions of existing homes or new homes or both.
Apartment prices across South Korea set their first weekly fall in 16 months last week, data from the country's largest lender, Kookmin Bank, showed on Friday.
Home prices grew 3 per cent in June from a year earlier, above the annual consumer inflation rate of 2.6 per cent for the month but slowing for a second consecutive month, Kookmin Bank data showed.
But an index from the bank that measures activity in home transactions fell last month to an 18-month low of 0.2 from 0.3 in May and from as high as 1.3 set in September 2009.
South Korea has on several occasions imposed strict limits on the maximum amount of mortgage loans that home owners can borrow on the basis of the market prices of the homes or borrowers' annual income.
Local media and some politicians have demanded the restrictions be eased, but financial authorities have repeatedly said they would not loosen them drastically, mainly out of fear that already high household borrowing could flare up again. -- Reuters
Source: Business Times, 20 Jul 2010
Tuesday, July 6, 2010
More than just K-pop heading here from Seoul
Korean investors building up property holdings in Asia, including Singapore
SOUTH Korean investors are keen on a larger slice of their Asian neighbours' real estate pie - and some of them have their eye on Singapore.
Korean investment in Asian real estate may currently be worth more than US$10 billion, estimates Derek Wong, director of real estate investment & finance at Woori, Korea's largest financial group. This sum, he believes, has the potential to increase by 52-100 per cent over the next 3-5 years.
Forced to take rain checks for over a decade by not one but two financial crises, Korean investors can finally seek overseas investment opportunities under clear skies. And they are doing so with a vengeance.
'With Korean National Pension Service (NPS) acquiring more than US$3 billion worth of overseas real estate in the last six months, we expect other Korean pension, insurance and investment funds to follow suit,' says Mr Wong.
NPS plans to have 6.6 per cent of assets in overseas equities in 2011, compared with 5.1 per cent targeted for this year, and is considering establishing a fund that will focus on investments in Asia.
Besides the pension funds, Mr Wong names conglomerates with a lot of liquidity - such as Samsung, Daewoo and Hyundai - as well as insurance companies such as Samsung Insurance and Woori Aviva as other investors with pent-up interest and strong balance sheets.
'Since the 1997 Asian financial crisis, when Korean conglomerates were badly hit, Korean corporates had to strengthen their corporate balance sheets and were discouraged by the Korean government from making any significant overseas investments,' says Mr Wong.
As an indicator of how pent-up Korean interest can surge, he highlights how Korean investment in overseas real estate leapt from less than US$10 million in 2003 to US$750 million in 2006. It was about US$1.2 billion in 2008 before the global crisis halted all overseas investments again.
While China and Hong Kong are natural favourites for Korean investment, Singapore wins points for the transparency of its market - as well as for its political stability, strong legal system and clear tax structure without capital gains tax.
Korea was already making its presence felt in Singapore's residential market before the crisis set in; in 2007, Koreans accounted for 7 per cent of all foreign buyers and were ranked joint fifth among foreign buyers in Singapore.
Post-crisis, Korean investment is not a one-way street. The sharp depreciation of the Korean won during the crisis attracted an influx of overseas funds, especially from the United States.
Despite the strengthening of the won, the success of these early-bird investors has garnered Korean real estate a steady stream of attention. Woori is currently stitching together about US$2-3 billion worth of deals in Seoul, as well as facilitating the investment of Malaysian conglomerate Berjaya in an integrated resort on Jeju Island.
Mr Wong estimates that a standing asset in Korea can fetch a yield of about 6 per cent per annum, compared to a much lower 4 per cent in Singapore.
Choice picks of Korean real estate include office buildings and retail malls, he adds. 'These depend a lot on the economy of the country, and the Korean economy looks to be good for the next 10 years.'
The Korean government predicted last month that Korea's economy would grow 5.8 per cent this year.
Of course, many investors remain leery of Korea due to the language barrier and the political tension between the North and the South, as well as a widespread perception of the Korean market as being insular and 'closed off'.
'It's a misconception,' says Mr Wong, who feels that the country is making an effort to reach out to the world, especially through its entertainment scene.
'Now is a good time to break the Korean mystique,' he concludes. 'A lot of people say we're going through 'the golden decade of Korea'.'
Korean overseas investment leapt from less than US$10m in 2003 to US$1.2 billion in 2008.
Source: Business Times, 6 Jul 2010
SOUTH Korean investors are keen on a larger slice of their Asian neighbours' real estate pie - and some of them have their eye on Singapore.
Korean investment in Asian real estate may currently be worth more than US$10 billion, estimates Derek Wong, director of real estate investment & finance at Woori, Korea's largest financial group. This sum, he believes, has the potential to increase by 52-100 per cent over the next 3-5 years.
Forced to take rain checks for over a decade by not one but two financial crises, Korean investors can finally seek overseas investment opportunities under clear skies. And they are doing so with a vengeance.
'With Korean National Pension Service (NPS) acquiring more than US$3 billion worth of overseas real estate in the last six months, we expect other Korean pension, insurance and investment funds to follow suit,' says Mr Wong.
NPS plans to have 6.6 per cent of assets in overseas equities in 2011, compared with 5.1 per cent targeted for this year, and is considering establishing a fund that will focus on investments in Asia.
Besides the pension funds, Mr Wong names conglomerates with a lot of liquidity - such as Samsung, Daewoo and Hyundai - as well as insurance companies such as Samsung Insurance and Woori Aviva as other investors with pent-up interest and strong balance sheets.
'Since the 1997 Asian financial crisis, when Korean conglomerates were badly hit, Korean corporates had to strengthen their corporate balance sheets and were discouraged by the Korean government from making any significant overseas investments,' says Mr Wong.
As an indicator of how pent-up Korean interest can surge, he highlights how Korean investment in overseas real estate leapt from less than US$10 million in 2003 to US$750 million in 2006. It was about US$1.2 billion in 2008 before the global crisis halted all overseas investments again.
While China and Hong Kong are natural favourites for Korean investment, Singapore wins points for the transparency of its market - as well as for its political stability, strong legal system and clear tax structure without capital gains tax.
Korea was already making its presence felt in Singapore's residential market before the crisis set in; in 2007, Koreans accounted for 7 per cent of all foreign buyers and were ranked joint fifth among foreign buyers in Singapore.
Post-crisis, Korean investment is not a one-way street. The sharp depreciation of the Korean won during the crisis attracted an influx of overseas funds, especially from the United States.
Despite the strengthening of the won, the success of these early-bird investors has garnered Korean real estate a steady stream of attention. Woori is currently stitching together about US$2-3 billion worth of deals in Seoul, as well as facilitating the investment of Malaysian conglomerate Berjaya in an integrated resort on Jeju Island.
Mr Wong estimates that a standing asset in Korea can fetch a yield of about 6 per cent per annum, compared to a much lower 4 per cent in Singapore.
Choice picks of Korean real estate include office buildings and retail malls, he adds. 'These depend a lot on the economy of the country, and the Korean economy looks to be good for the next 10 years.'
The Korean government predicted last month that Korea's economy would grow 5.8 per cent this year.
Of course, many investors remain leery of Korea due to the language barrier and the political tension between the North and the South, as well as a widespread perception of the Korean market as being insular and 'closed off'.
'It's a misconception,' says Mr Wong, who feels that the country is making an effort to reach out to the world, especially through its entertainment scene.
'Now is a good time to break the Korean mystique,' he concludes. 'A lot of people say we're going through 'the golden decade of Korea'.'
Korean overseas investment leapt from less than US$10m in 2003 to US$1.2 billion in 2008.
Source: Business Times, 6 Jul 2010
Thursday, May 6, 2010
South Koreans' foreign property purchases sharply down in Q1
(SEOUL) South Koreans' purchases of overseas property declined during the first quarter from three months earlier as investor sentiment remained sluggish despite steadily improving global economic conditions, data showed yesterday.
According to the data provided by the Ministry of Strategy and Finance, South Koreans purchased a total of US$58.7 million worth of land, houses and other property in foreign countries in the January-March period - sharply down from the US$85.1 million tallied during the fourth quarter of 2009.
The sharp quarter-on-quarter reduction is attributable to sluggish sentiment among investors, who remain reluctant to venture out to purchase expensive assets amid lingering global economic uncertainties, reported Yonhap news agency.
Bolstered by the government's move to ease related regulations, South Koreans' investments in overseas property had been growing sharply until the world was hit by the financial crisis in late 2008.
In 2003, local citizens bought a total of US$3.6 million worth of overseas property, but the amount jumped to US$743.5 million and US$1.17 billion in 2006 and 2007, respectively, according to the data.
The global financial crisis and resulting economic downturn worldwide, however, dampened market sentiment. Property transactions halved to US$514 million in 2008 and further declined to US$223 million last year, the data showed. -- Bernama
Source: Business Times, 6 May 2010
According to the data provided by the Ministry of Strategy and Finance, South Koreans purchased a total of US$58.7 million worth of land, houses and other property in foreign countries in the January-March period - sharply down from the US$85.1 million tallied during the fourth quarter of 2009.
The sharp quarter-on-quarter reduction is attributable to sluggish sentiment among investors, who remain reluctant to venture out to purchase expensive assets amid lingering global economic uncertainties, reported Yonhap news agency.
Bolstered by the government's move to ease related regulations, South Koreans' investments in overseas property had been growing sharply until the world was hit by the financial crisis in late 2008.
In 2003, local citizens bought a total of US$3.6 million worth of overseas property, but the amount jumped to US$743.5 million and US$1.17 billion in 2006 and 2007, respectively, according to the data.
The global financial crisis and resulting economic downturn worldwide, however, dampened market sentiment. Property transactions halved to US$514 million in 2008 and further declined to US$223 million last year, the data showed. -- Bernama
Source: Business Times, 6 May 2010
Tuesday, January 12, 2010
Korea to build city as science, education hub
16.5t won blueprint scraps 2005 plan to relocate parts of govt to Sejong
South Korea yesterday announced a 16.5 trillion won (S$20.4 billion) blueprint to develop a new city as a science and education hub, scrapping controversial plans to relocate much of the government there.
The country’s biggest business group Samsung has signed a deal to move some operations to Sejong City, along with the Hanwha, Woongjin and Lotte groups, said Prime Minister Chung Un-Chan.
Yesterday’s announcement officially axes a plan unveiled in 2005 by then-President Roh Moo-Hyun to relocate nine ministries and four subsidiary agencies to the proposed city 150 kilometres south of Seoul.
Mr Roh’s liberal government had said the aim was to promote balanced regional development in a country where almost half the population lives in Seoul or surrounding cities.
The plan was also attractive to the Chungcheong region, whose traditionally uncommitted voters have often swung elections.
But Mr Chung’s office said it ‘would have resulted in inefficiency and waste’ of national resources.
However, the current conservative government will face an uphill battle securing parliamentary approval to change the plan, against objections from the opposition and from a sizeable faction of the ruling Grand National Party.
‘The Sejong City plan . . . is a task of correcting past errors and paving the ground for a new future,’ the prime minister said. ‘If the promise of the past was politically driven it would be courageous for a leader to correct it, albeit belatedly.’
The government has decided to create an economic hub centred on education and science in Sejong with total investments of 16.5 trillion won (S$20.4 billion), including 4.5 trillion won from the private sector, Mr Chung said.
‘We expect Sejong will grow into a self-sufficient city with a population of 500,000 with 246,000 new jobs by 2020.’
The city is named after the revered 15th-century monarch who invented the country’s alphabet.
The government has since 2005 built roads and other basic infrastructure as a prelude to transforming the country town into a sprawling modern city.
The government will provide incentives such as cheaper land, tax cuts and subsidies to lure firms, college campuses, research institutes and hospitals there.
Some 1.9 million square metres of land will be open for foreign investors.
An international science and business belt will be centred on Sejong, the ministry of education, science and technology said, adding that this could create new growth opportunities and allow the new city to become self-sufficient.
‘We believe it will spur balanced development and enhance the competitiveness of our nation,’ the Korea Employers’ Federation said. Samsung promised to invest 2.05 trillion won in the city.
Source: Business Times, 12 Jan 2010
South Korea yesterday announced a 16.5 trillion won (S$20.4 billion) blueprint to develop a new city as a science and education hub, scrapping controversial plans to relocate much of the government there.
The country’s biggest business group Samsung has signed a deal to move some operations to Sejong City, along with the Hanwha, Woongjin and Lotte groups, said Prime Minister Chung Un-Chan.
Yesterday’s announcement officially axes a plan unveiled in 2005 by then-President Roh Moo-Hyun to relocate nine ministries and four subsidiary agencies to the proposed city 150 kilometres south of Seoul.
Mr Roh’s liberal government had said the aim was to promote balanced regional development in a country where almost half the population lives in Seoul or surrounding cities.
The plan was also attractive to the Chungcheong region, whose traditionally uncommitted voters have often swung elections.
But Mr Chung’s office said it ‘would have resulted in inefficiency and waste’ of national resources.
However, the current conservative government will face an uphill battle securing parliamentary approval to change the plan, against objections from the opposition and from a sizeable faction of the ruling Grand National Party.
‘The Sejong City plan . . . is a task of correcting past errors and paving the ground for a new future,’ the prime minister said. ‘If the promise of the past was politically driven it would be courageous for a leader to correct it, albeit belatedly.’
The government has decided to create an economic hub centred on education and science in Sejong with total investments of 16.5 trillion won (S$20.4 billion), including 4.5 trillion won from the private sector, Mr Chung said.
‘We expect Sejong will grow into a self-sufficient city with a population of 500,000 with 246,000 new jobs by 2020.’
The city is named after the revered 15th-century monarch who invented the country’s alphabet.
The government has since 2005 built roads and other basic infrastructure as a prelude to transforming the country town into a sprawling modern city.
The government will provide incentives such as cheaper land, tax cuts and subsidies to lure firms, college campuses, research institutes and hospitals there.
Some 1.9 million square metres of land will be open for foreign investors.
An international science and business belt will be centred on Sejong, the ministry of education, science and technology said, adding that this could create new growth opportunities and allow the new city to become self-sufficient.
‘We believe it will spur balanced development and enhance the competitiveness of our nation,’ the Korea Employers’ Federation said. Samsung promised to invest 2.05 trillion won in the city.
Source: Business Times, 12 Jan 2010
Thursday, December 24, 2009
Seoul apartment prices up 23.7% in 9 months
Apartment prices in the capital Seoul rose 23.7 per cent in the first nine months of the year, South Korean government data released for the first time yesterday showed, 10 times as fast as a private bank reported earlier.
The Ministry of Land, Transport and Maritime Affairs said in a statement that the wide difference did not mean that previous figures from Kookmin Bank, the country’s top mortgage lender, were incorrect but reflected a different calculating method.
It said that the government data was based on prices by actual buyers reported to the authorities whereas Kookmin’s figures were based on surveys of realtors.
Official data showed that apartment prices in the capital, where about one-fifth of South Korea’s population lives, fell 18.9 per cent during the July-December 2008 period whereas Kookmin data showed that prices dropped just 2.5 per cent.
Real estate prices in emerging economies are closely watched by investors because any sign of building asset price bubbles on the back of fast economic recovery could prompt policymakers to tighten monetary policy.
South Korea’s central bank warned in September that it would raise interest rates if real estate prices and mortgage lending growth accelerated, though it stepped back later after the government imposed lending controls.
The Bank of Korea has held its benchmark seven-day repurchase agreement rate steady at record-low 2.0 per cent for the past 10 months and is widely expected to begin raising it from early 2010 in line with the recovering economy.
Source: Business Times, 24 Dec 2009
The Ministry of Land, Transport and Maritime Affairs said in a statement that the wide difference did not mean that previous figures from Kookmin Bank, the country’s top mortgage lender, were incorrect but reflected a different calculating method.
It said that the government data was based on prices by actual buyers reported to the authorities whereas Kookmin’s figures were based on surveys of realtors.
Official data showed that apartment prices in the capital, where about one-fifth of South Korea’s population lives, fell 18.9 per cent during the July-December 2008 period whereas Kookmin data showed that prices dropped just 2.5 per cent.
Real estate prices in emerging economies are closely watched by investors because any sign of building asset price bubbles on the back of fast economic recovery could prompt policymakers to tighten monetary policy.
South Korea’s central bank warned in September that it would raise interest rates if real estate prices and mortgage lending growth accelerated, though it stepped back later after the government imposed lending controls.
The Bank of Korea has held its benchmark seven-day repurchase agreement rate steady at record-low 2.0 per cent for the past 10 months and is widely expected to begin raising it from early 2010 in line with the recovering economy.
Source: Business Times, 24 Dec 2009
Thursday, November 5, 2009
S Korea mortgage lending growth slows
(SEOUL) South Korean mortgage lending to households across the financial sector grew at a slower pace last month as a result of tight loan control efforts, Yonhap reported yesterday, easing pressure for an early rate hike.
The state-run news agency reported that data from the Financial Supervisory Service (FSS) showed non-bank financial firms increased their combined mortgage lending by 1.1 trillion won (S$1.3 billion) last month, less than the 1.3 trillion won gain in September. Banks' mortgage lending growth slowed for a fourth consecutive month, with the loan increase easing to 2.1 trillion won in October from 2.4 trillion won in September and significantly from 3.8 trillion won seen in June, the FSS said. The nation's financial authorities have stepped up their loan control measures since early July to temper a growing property market bubble, a concern that the central bank clearly warned might force it to raise rates. -- Reuters
Source: Business Times, 5 Nov 2009
The state-run news agency reported that data from the Financial Supervisory Service (FSS) showed non-bank financial firms increased their combined mortgage lending by 1.1 trillion won (S$1.3 billion) last month, less than the 1.3 trillion won gain in September. Banks' mortgage lending growth slowed for a fourth consecutive month, with the loan increase easing to 2.1 trillion won in October from 2.4 trillion won in September and significantly from 3.8 trillion won seen in June, the FSS said. The nation's financial authorities have stepped up their loan control measures since early July to temper a growing property market bubble, a concern that the central bank clearly warned might force it to raise rates. -- Reuters
Source: Business Times, 5 Nov 2009
Tuesday, October 6, 2009
S Korea home prices up again
(SEOUL) Apartment prices across South Korea rose for the 17th straight week, the longest gaining streak since July 2008, data from the country's top lender showed yesterday.
Apartment prices rose by 0.1 per cent last week from the previous week, extending a rising trend that started in early June, according to data from Kookmin Bank. The data came amid growing expectations for a rate increase this year after the central bank warned several times that it would lift interest rates to calm the property market.
The Bank of Korea is scheduled to review rates on Friday. -- Reuters
Source: Business Times, 6 Oct 2009
Apartment prices rose by 0.1 per cent last week from the previous week, extending a rising trend that started in early June, according to data from Kookmin Bank. The data came amid growing expectations for a rate increase this year after the central bank warned several times that it would lift interest rates to calm the property market.
The Bank of Korea is scheduled to review rates on Friday. -- Reuters
Source: Business Times, 6 Oct 2009
South Korea may clamp down on housing bubble
Its central bank may break ranks with G-20 partners and raise interest rates
(SEOUL) Would-be home owner Hwang Min-soon is the sort of bullish property buyer who may prompt the central bank to break ranks with the G-20 and raise interest rates.
She is considering the purchase of a 104 square metre apartment in Seoul, where property prices have defied the global financial crisis to rise 20 per cent since the start of the year. When asked the sort of return she expected on her investment, Ms Hwang replied: 'In the next two to three years, I'd say 70 to 80 million won (S$84,000 to S$96,000).' That would be in the order of 30 per cent.
Property prices in South Korea are rising rapidly and, since urban South Koreans show no sign of losing their voracious appetite for property, so, more worryingly, are mortgages.
The central bank slashed its interest rates to a record low of 2 per cent to support the economy during the crisis. But it is now highlighting the property binge as reason enough to start raising them, even if that means breaking ranks with its G-20 partners, who have pledged to keep stimulus measures in place. Financial regulators are also ready to impose more controls on home loans.
The central bank meets later this week, although it is not expected to change rates. However, financial markets have priced in the risk of a rate rise as early as November.
If the global downturn has hammered property prices in the US and other leading economies, those in the Seoul metropolitan region - which houses half South Korea's population - have hardly paused for breath.
Still, most of the rally may be over and buyers such as Ms Hwang may not get the returns they are looking for. A Reuters poll of property consultants, analysts and economists forecasts house prices are set to rise another one-2 per cent by the end of 2009 and another 3.3 per cent in 2010.
That would be a sharp slowdown from the heady pace seen so far this year and certainly not the returns that Ms Hwang and others are hoping for.
Indeed, the poll suggested that prices will rise a further 6.5 per cent from current levels before peaking sometime in the next few years. If history is anything to go by, the property rally may well be far from over. Since the Asian financial crisis in 1997/98, property prices in Seoul have more than tripled.
Increases are even bigger in southern Seoul, where a reputation for good schools and large capital gains are driving demand.
South Koreans put nearly 80 per cent of their assets into property, compared with barely half in advanced economies where more investment goes into areas like pensions. Mortgage loans, for instance, have risen for eight consecutive quarters despite the economy's slide during the global financial crisis.
The appetite for property, say analysts, makes the financial system more vulnerable to a house price bubble, which has been fuelled partly by a wave of cheap money pumped into the economy by the government to ease the pain of the downturn.
The property rally has also been spurred by pent-up demand after authorities last year repealed measures imposed in 2006 and 2007 to clamp down on the last speculative wave of house buying.
It risks, says the central bank, getting out of hand. So, it has threatened to raise rates. The finance ministry is opposed to the idea in case higher borrowing costs damages the economy.
While financial markets suggest a rate rise could happen as soon as next month, many analysts see them on hold until next year. 'The Bank of Korea is very concerned the housing market and household debts have just kept expanding even through the crisis period,' said Song Jae-hyeok, an economist at SK Securities.
Korea is not alone in seeing the danger of an asset bubble forming in its housing market. Australia's central bank has flagged similar dangers and markets say that it could raise rates as soon as today.
Property prices are rising sharply in China, Singapore and Hong Kong. Central bankers, including those in the US and Europe, are debating whether interest rates - usually a weapon that impacts an economy broadly - is the right tool to clamp down on speculation in a single sector.
An International Monetary Fund report published recently pointed out that central bankers could have helped prevent the current crisis that was sparked by housing prices bubbling over. -- Reuters
Source: Business Times, 6 Oct 2009
(SEOUL) Would-be home owner Hwang Min-soon is the sort of bullish property buyer who may prompt the central bank to break ranks with the G-20 and raise interest rates.
She is considering the purchase of a 104 square metre apartment in Seoul, where property prices have defied the global financial crisis to rise 20 per cent since the start of the year. When asked the sort of return she expected on her investment, Ms Hwang replied: 'In the next two to three years, I'd say 70 to 80 million won (S$84,000 to S$96,000).' That would be in the order of 30 per cent.
Property prices in South Korea are rising rapidly and, since urban South Koreans show no sign of losing their voracious appetite for property, so, more worryingly, are mortgages.
The central bank slashed its interest rates to a record low of 2 per cent to support the economy during the crisis. But it is now highlighting the property binge as reason enough to start raising them, even if that means breaking ranks with its G-20 partners, who have pledged to keep stimulus measures in place. Financial regulators are also ready to impose more controls on home loans.
The central bank meets later this week, although it is not expected to change rates. However, financial markets have priced in the risk of a rate rise as early as November.
If the global downturn has hammered property prices in the US and other leading economies, those in the Seoul metropolitan region - which houses half South Korea's population - have hardly paused for breath.
Still, most of the rally may be over and buyers such as Ms Hwang may not get the returns they are looking for. A Reuters poll of property consultants, analysts and economists forecasts house prices are set to rise another one-2 per cent by the end of 2009 and another 3.3 per cent in 2010.
That would be a sharp slowdown from the heady pace seen so far this year and certainly not the returns that Ms Hwang and others are hoping for.
Indeed, the poll suggested that prices will rise a further 6.5 per cent from current levels before peaking sometime in the next few years. If history is anything to go by, the property rally may well be far from over. Since the Asian financial crisis in 1997/98, property prices in Seoul have more than tripled.
Increases are even bigger in southern Seoul, where a reputation for good schools and large capital gains are driving demand.
South Koreans put nearly 80 per cent of their assets into property, compared with barely half in advanced economies where more investment goes into areas like pensions. Mortgage loans, for instance, have risen for eight consecutive quarters despite the economy's slide during the global financial crisis.
The appetite for property, say analysts, makes the financial system more vulnerable to a house price bubble, which has been fuelled partly by a wave of cheap money pumped into the economy by the government to ease the pain of the downturn.
The property rally has also been spurred by pent-up demand after authorities last year repealed measures imposed in 2006 and 2007 to clamp down on the last speculative wave of house buying.
It risks, says the central bank, getting out of hand. So, it has threatened to raise rates. The finance ministry is opposed to the idea in case higher borrowing costs damages the economy.
While financial markets suggest a rate rise could happen as soon as next month, many analysts see them on hold until next year. 'The Bank of Korea is very concerned the housing market and household debts have just kept expanding even through the crisis period,' said Song Jae-hyeok, an economist at SK Securities.
Korea is not alone in seeing the danger of an asset bubble forming in its housing market. Australia's central bank has flagged similar dangers and markets say that it could raise rates as soon as today.
Property prices are rising sharply in China, Singapore and Hong Kong. Central bankers, including those in the US and Europe, are debating whether interest rates - usually a weapon that impacts an economy broadly - is the right tool to clamp down on speculation in a single sector.
An International Monetary Fund report published recently pointed out that central bankers could have helped prevent the current crisis that was sparked by housing prices bubbling over. -- Reuters
Source: Business Times, 6 Oct 2009
Friday, September 25, 2009
Housing market sizzles again
S. Korea's economic data fuels optimism
SEOUL: It is hard to miss the upbeat mood in South Korea these days. The latest economic indicators coming out of Asia's fourth-largest economy show that the country is edging out of the financial doghouse that the world was thrown into late last year.
One indicator that analysts have pointed to is the slowly but steadily rising housing prices. The appetite to buy property has returned on the back of record low borrowing costs.
Since April, housing prices have climbed for five consecutive months, according to market data by Kookmin Bank. Last month, prices rose another 0.3 per cent above the previous month.
Housing prices in Seoul, the economic heart of the country, have a bearing on prices nationwide, and they went up by 0.5 per cent. Transactions also picked up.
'People are confident enough to buy houses because they sense they don't need to hold on to cash any more,' said Mr Lee Chung Yeol, a real estate agent in the Gangnam district.
'The only question is how sustainable that demand will be.'
Mr Ahn Myung Su, 34, who bought an apartment in Mapogu in western Seoul two months ago, is happy with his purchase.
'I think if I had waited longer it would have gone out of my budget range,' he said.
Though aware that the market was volatile, he was not concerned. 'We are going to live here for a while so I am less worried about price drops.'
Observers have warned of a bubble forming in the housing market as speculators are contributing to the rising demand. Officials are concerned that if the bubble bursts, it could put the country in a worse position than in the immediate aftermath of the global collapse late last year.
In July, the government decided to cap the amount of money home-buyers can borrow. The limit was lowered to no more than 50 per cent of the value of a residence in Seoul and nearby areas, down from 60 per cent. Banks were instructed to look closer at incomes when granting loans.
Still, talk of financial doom has eased.
Finance Minister Yoon Jeung Hyun said: 'The Korean economy is expected to continue a recovery trend in the second half of the year, helped by improvement in internal and external factors.'
There is also good reason to be optimistic.
South Korea's gross domestic product grew at a rate of 2.6 per cent more in the second quarter than in the first, the fastest quarter-on-quarter growth among Organisation for Economic Cooperation and Development members.
The benchmark stock index Kospi, which nosedived from the 1,400 level last September to below 940 last October, is hovering around the 1,700 level this week.
For an export-driven economy, the Korean won has performed well against the US dollar - it has strengthened from 1,570 won in early March to 1,194 on Wednesday.
Mirae Asset Securities Co, the country's biggest seller of mutual fund products, predicted earlier this month that the Kospi could rise to 1,800 by the end of the year because of improved corporate earnings.
The positive indicators have fuelled a debate on when and how the government will take care of the excess liquidity poured into the market as part of the aggressive measures it implemented to spur corporate investment and stimulate consumption.
Well aware that a premature exit from its expansionary path could put the economy at risk of sliding into a 'double-dip' recession, the Bank of Korea has kept the benchmark interest rate unchanged at a record low 2 per cent for a seventh straight month.
For now, the government is keeping its fingers crossed that it can keep the momentum going.
'In the coming months, the Korean economy is likely to maintain its positive growth on a quarter-on-quarter basis, helped by the improvement in the world economic environment and the rebuilding of inventories,' the Bank of Korea said in a statement.
On a more cautionary note, it added that a number of uncertainties surround the actual pace of growth.
Mr Lee Jae Joon, a researcher with the Korea Development Institute, said: 'The Korean economy has entered a recovery phase. I expect the export and import levels to return to normal soon.
'But there is a chance that the economy might contract once the government starts to absorb all that liquidity.'
Source: Straits Times, 25 Sep 2009
SEOUL: It is hard to miss the upbeat mood in South Korea these days. The latest economic indicators coming out of Asia's fourth-largest economy show that the country is edging out of the financial doghouse that the world was thrown into late last year.
One indicator that analysts have pointed to is the slowly but steadily rising housing prices. The appetite to buy property has returned on the back of record low borrowing costs.
Since April, housing prices have climbed for five consecutive months, according to market data by Kookmin Bank. Last month, prices rose another 0.3 per cent above the previous month.
'People are confident enough to buy houses because they sense they don't need to hold on to cash any more,' said Mr Lee Chung Yeol, a real estate agent in the Gangnam district.
'The only question is how sustainable that demand will be.'
Mr Ahn Myung Su, 34, who bought an apartment in Mapogu in western Seoul two months ago, is happy with his purchase.
'I think if I had waited longer it would have gone out of my budget range,' he said.
Though aware that the market was volatile, he was not concerned. 'We are going to live here for a while so I am less worried about price drops.'
Observers have warned of a bubble forming in the housing market as speculators are contributing to the rising demand. Officials are concerned that if the bubble bursts, it could put the country in a worse position than in the immediate aftermath of the global collapse late last year.
In July, the government decided to cap the amount of money home-buyers can borrow. The limit was lowered to no more than 50 per cent of the value of a residence in Seoul and nearby areas, down from 60 per cent. Banks were instructed to look closer at incomes when granting loans.
Still, talk of financial doom has eased.
Finance Minister Yoon Jeung Hyun said: 'The Korean economy is expected to continue a recovery trend in the second half of the year, helped by improvement in internal and external factors.'
There is also good reason to be optimistic.
South Korea's gross domestic product grew at a rate of 2.6 per cent more in the second quarter than in the first, the fastest quarter-on-quarter growth among Organisation for Economic Cooperation and Development members.
The benchmark stock index Kospi, which nosedived from the 1,400 level last September to below 940 last October, is hovering around the 1,700 level this week.
For an export-driven economy, the Korean won has performed well against the US dollar - it has strengthened from 1,570 won in early March to 1,194 on Wednesday.
Mirae Asset Securities Co, the country's biggest seller of mutual fund products, predicted earlier this month that the Kospi could rise to 1,800 by the end of the year because of improved corporate earnings.
The positive indicators have fuelled a debate on when and how the government will take care of the excess liquidity poured into the market as part of the aggressive measures it implemented to spur corporate investment and stimulate consumption.
Well aware that a premature exit from its expansionary path could put the economy at risk of sliding into a 'double-dip' recession, the Bank of Korea has kept the benchmark interest rate unchanged at a record low 2 per cent for a seventh straight month.
For now, the government is keeping its fingers crossed that it can keep the momentum going.
'In the coming months, the Korean economy is likely to maintain its positive growth on a quarter-on-quarter basis, helped by the improvement in the world economic environment and the rebuilding of inventories,' the Bank of Korea said in a statement.
On a more cautionary note, it added that a number of uncertainties surround the actual pace of growth.
Mr Lee Jae Joon, a researcher with the Korea Development Institute, said: 'The Korean economy has entered a recovery phase. I expect the export and import levels to return to normal soon.
'But there is a chance that the economy might contract once the government starts to absorb all that liquidity.'
Source: Straits Times, 25 Sep 2009
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