LH chief calls for tighter mortgage rules for first-time buyers to cool housing prices

Current mortgage caps set at 600 million, 400 million and 200 million won by price tier

'Gradual regulation better than sharp swings,' LH chief says

LH vows to pursue both reform and housing supply goals

Korea Land and Housing Corporation President Lee Sung-hoon answers questions at a press briefing on Wednesday. [LH]

Korea Land and Housing Corporation President Lee Sung-hoon said the current mortgage regulation allowing first-time homebuyers to borrow up to 70 percent of a property's value under the loan-to-value ratio rule needs to be tightened further. He also said that stricter lending rules would help keep housing prices from swinging sharply in either direction.

Speaking at a press briefing on Wednesday, Lee was asked whether current housing supply measures were sufficient to ensure residential stability. "There is inevitably a time lag in housing supply," he said. "I think this is a moment when loan regulation is needed."

Lee particularly flagged the existing first-time homebuyer program, which allows borrowers to access loans of up to 70 percent of a property's value. "I hear that many first-time buyers are taking out the maximum loans and competing to buy homes," he said. "It is time to think about what effect continuously rising housing prices will have on our community."

Under current rules in Greater Seoul and regulated zones, mortgage loan caps are tiered by property price: 600 million won ($443,000) for homes priced at 1.5 billion won or below, 400 million won for homes between 1.5 billion won and 2.5 billion won, and 200 million won for homes above 2.5 billion won. In regulated zones — designated adjustment target areas and speculative overheating districts — the loan-to-value ratio is capped at 40 percent of the property value for most buyers, with zero allowed for multi-home owners. First-time buyers, however, are eligible for up to 70 percent.

Lee acknowledged the risks of tightening further. "If we impose loan regulations, there are concerns that we would be pulling up the housing ladder, and it could disrupt the plans of people who are about to buy a home," he said. At the same time, he warned that keeping the loan cap at 600 million won could raise the burden on many people and push the housing ladder even higher. "Rather than sharp rises and falls, it would be better to use steady loan regulation to allow housing prices to move gradually," he added.

Asked whether he had discussed the matter with the Financial Services Commission or the Ministry of Economy and Finance, Lee said he was not sure how the government was handling those discussions internally, but added that he believed it was an issue that had been under continuous consideration and review for some time.

A loan counter at a bank in Seoul. [Herald DB]

On criticism that the government's residential stability plan is heavily weighted toward rental housing and may fall short of meeting demand from buyers, Lee said Korea Land and Housing Corporation would focus on pre-sale units in the near term. Of the 1.19 million public housing units the government has pledged to supply by 2030, 243,000 are planned as public pre-sale homes.

"In the long run, we will need to move toward universal rental housing, but right now pre-sales are more important to meet domestic demand," Lee said. He added that the corporation plans to put nearly 100,000 units up for pre-sale in new towns alone over the next three years. "We plan to supply at least 30,000 units in 2028 — the largest volume since the first-generation new towns — so there is no need to worry," he said.

On concerns that the ongoing restructuring of Korea Land and Housing Corporation could disrupt housing supply plans, Lee said the corporation was in talks with the government on reinforcing staffing and budgets. The government announced on Sept. 3 a plan to split the corporation into two entities — a housing and urban development company to handle construction and development, and a housing and urban asset company to manage welfare and asset reserves — in order to improve supply efficiency. "We are specifically asking the government to ensure that employees do not face any disadvantage in terms of treatment or pay during the spin-off process," Lee said, adding that a government announcement was expected soon.

On the target of breaking ground on 50,000 units, Lee said a large portion of the projects were currently in the permitting process, which tends to concentrate in the autumn. "We will make sure to meet the target by December," he said. He also sought to ease concerns raised by cases such as the Seoripul district, saying the overall schedule remained on track. "We will do our best to catch both rabbits — LH reform and housing supply," he added.

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