Invest1 publisher3 min readPublished
LH chief Lee Sung-hoon calls for a lower 600 million won mortgage cap around Seoul
Korea Land & Housing chief Lee Sung-hoon wants the 600 million won mortgage cap on greater Seoul homes up to 1.5 billion won lowered. His plan uses credit to hold prices until new supply arrives, and buyers in their 30s, the heaviest borrowers, would put up more of their own cash.
The Investor · Invest desk
What happened
- Seoul apartment prices rose for an 86th straight week in the fourth week of September, a longer run than any under the Moon Jae-in administration, per the Korea Real Estate Board.
- A first-time buyer of a 1 billion won home may borrow only 600 million won despite the 70% LTV allowance, so at least 400 million won must come from their own funds before taxes.
- Lee said he had not discussed the proposal with the Financial Services Commission or the Ministry of Economy and Finance, the agencies that oversee lending rules.
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Why it matters
- cost Every won cut from the cap means another won of cash for a buyer borrowing at the limit, and that bill falls hardest on buyers in their 30s, the most loan-dependent age group in the filings.
- constraint A lower cap would pull the price at which the 70% first-time LTV stops mattering below about 857 million won, so that allowance would apply to fewer homes.
- exposure Buyers without employer credit or parental help carry the risk, since a Samsung Electronics company loan of up to 500 million won at 1.5% already exceeds the own-funds gap on a 1 billion won home.
Six hundred million won is 70% of about 857 million won [1]. Above that price, a first-time buyer in greater Seoul or a regulated zone hits the cap before the 70% loan-to-value limit, so the cap sets the loan [3][1]. At the top of the band, a 1.5 billion won home, the same 600 million won covers 40% of the price and leaves 900 million won for the buyer to find [2].
Lee's case for tightening is about timing. "Because there is inevitably a time lag in housing supply, now is the moment when lending restrictions are needed," he said at a press briefing in Yongin on September 30 [2]. LH is the state-run housing developer [1]. Its president is conceding that his own construction pipeline will not arrive in time, and he wants buyers' borrowing to absorb the gap until it does [1][2].
Buyers in their 30s spent 39.5984 trillion won on Seoul homes between February 10 and the end of July, and 15.8724 trillion won of it came from financial institution loans, according to funding-plan filings that People Power Party lawmaker Kim Jong-yang's office obtained from the land ministry [7]. The other 23.7 trillion won came from outside that lending [3]. Their loan share runs 15 points above buyers in their 40s and about 2.8 times that of buyers in their 50s [4]. "People are said to be buying homes competitively, borrowing the full 600 million won up to the 70% LTV limit," Lee said. "That is not good for the community." [4]
Lee acknowledged the cost himself. "There are concerns about kicking away the housing ladder, and the plans of citizens who want to buy a home could be disrupted," he said [9]. On lowering the 70% LTV for first-time buyers, he went halfway: "It is right that it should be reduced, but since it is a youth issue and the situation is ambiguous, I will put it obliquely" [10]. His reply to the objection is that waiting costs more. "If lending is kept at the current level and home prices keep rising, the burden on more citizens will grow and the housing ladder could actually become even higher," he said [11].
From here the proposal can go three ways. The regulators can leave it alone, since by Lee's account they were not part of it [5]. They can cut the cap, and younger buyers can turn to credit loans or non-bank lenders and carry a heavier funding burden, a risk the Seoul Economic Daily raises in its report [12]. Or the cut works as Lee intends and slows prices until supply arrives [1][2].
I think the record supports one official arguing in public, with the agencies that write lending rules not yet involved [1][5]. The counter-case is that a proposal floated from outside the rule-making chain costs the regulators nothing if it lands badly, and the head of LH is a convenient person to float one. The reporting does not show that happened. If the Financial Services Commission or the Ministry of Economy and Finance takes up a figure below 600 million won, that view is wrong [5].
What to watch
- Korea Real Estate Board weekly figures for October: a Seoul price streak running past 86 weeks gives Lee's argument more weight.
- Any change to the 70% first-time-buyer LTV, which Lee said should be reduced but declined to press because it is a youth issue.