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

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