South Korea to ease mortgage rules from Dec. 1 as market cools

The changes will be effective starting Dec. 1, as the government brought forward easing of rules from next year to help soft landing of the property market now seen to hurt economic growth. The red-hot five-year property boom in Asia's fourth largest economy has run out of steam, as a total of 250 basis points of interest rate hikes since August last year has brought pain in the market.

South Korea will ease lending rules for most of Seoul and in the outskirts of Seoul starting Dec. 1 as the once-hot property market has cooled amid rising interest rates. The government on Thursday said first-home buyers in Seoul will be able to borrow up to 50% of the property value, up from as low as 20% currently in Seoul.

Outright mortgage ban on properties valued over 1.5 billion won ($1.09 million) in Seoul will also be lifted. The changes will be effective starting Dec. 1, as the government brought forward easing of rules from next year to help soft landing of the property market now seen to hurt economic growth.

The red-hot five-year property boom in Asia's fourth largest economy has run out of steam, as a total of 250 basis points of interest rate hikes since August last year has brought pain in the market. "A partial downward revision of property prices, which have risen excessively in the past, is inevitable, but the possibility of a sharp cooling in the market combined with the recent steep interest rate hike should be something we should be wary of," Finance Minister Choo Kyung-ho said in a policy meeting.

The number of apartment transactions in Seoul for September stood at 615, the record low since relevant data began to be compiled in 2006. As part of Thursday's measures, the government also plans to increase project finance guarantees for small- to medium-sized projects through the state-run Korea Housing and Urban Guarantee Co.