S Korea Eases Property Controls For Small Cities

Source : The Business Times, June 12, 2008

(SEOUL) South Korea said yesterday that it was easing measures aimed at curbing a sharp rise in domestic housing prices for small cities to support ailing property markets.

The Ministry of Land, Transport and Maritime Affairs said in a statement that the government had decided to lift the maximum loan-to-value ratio for unsold houses to 70 per cent from the current 60 per cent in areas where housing prices are unlikely to jump on speculation, if builders cut prices of unsold houses by 10 per cent.

The loan-to-value ratio expresses the maximum amount of a home loan as a percentage of the home's market value, and South Korea has steadily reduced the limit over the past several years.

The government will also cut acquisition tax and registration tax for those homes by 50 per cent.

The concessions took effect from yesterday until the end of June next year, the ministry said.

The market cooling measures, along with higher property taxes, have dented demand for new homes in small cities, hitting the economy in those areas.

South Korea had some 132,000 unsold houses as of the end of March this year, almost double the average number over the last 10 years, ministry data showed.

Among those unsold houses, 109,000 units are in small cities. -- Reuters