A bank branch in Seoul. [Yonhap]
A bank branch in Seoul. [Yonhap]

The government's loan regulations are limiting young people's ability to buy homes while benefiting only the wealthy, a policy expert said Tuesday.

Choi Byung-cheon, a senior adviser at law firm Sejong and former deputy head of the Democratic Research Institute, wrote on his Facebook page Tuesday that loan regulations are "a policy that disadvantages young people and favors those with cash."

"The most effective way for young people to reduce asset inequality is to use their income as leverage to take out loans and purchase assets," Choi said. "Extending loans to young people who have the ability to repay is itself a policy that reduces asset inequality."

He added that "excessively restricting loans, regardless of the policy's intent, amounts to giving only cash-rich individuals the right to buy real estate."

Choi also cited data showing that the share of self-financed funds in Seoul home purchases rose from about 49 percent in 2022 to 65 percent in the first half of this year.

"Among all types of loans, mortgage loans have the lowest default rate because they go through rigorous screening of repayment capacity," he said. He also noted that business owners routinely tap outside capital through loans or share issuances, arguing there is no reason to view borrowing for asset purchases negatively.

The government has imposed restrictions including caps on mortgage loans in the Greater Seoul area to manage overheating in the real estate market.


arin@heraldcorp.com