Foreign Property News | Posted by Hnin Ei Khin
The Asian Development Bank has issued a fresh warning over South Korea's overheated property market ignited by loose credit policies in recent years.
The bank cautioned that growth in Asia’s fourth-largest economy would slow further this year and in 2019 not only because of the ongoing US-China trade war, but also due to the high degree of vulnerability from its housing sector.
The internal and external factors had warranted the ADB to lower South Korea's growth projection to 2.9 per cent from 3 per cent this year, and to 2.8 per cent from 2.9 per cent for 2019, according to its recent outlook report.
“Growth in Korea will be lower in both years as exports suffer under higher tariffs imposed by two of its largest trade partners,” the ADB said in the report.
The bank attributed the property risk with the country having the “least home affordability on price spikes” to prolonged accommodative monetary policies.
Following the September 13 real estate measures, the finance ministry and financial regulators indicated they will introduce a stricter and tougher set of metrics assessing bank lending to households and multiple homeowners in mid-October.
They are expected to enforce a system with revised ratios measuring personal credit risks such as loan-to-value and debt-to-income, as well as debt service ratio.
The government is likely to introduce “stronger standards” for the three metrics that would further limit banks and non-banking institutions from extending household loans, and simultaneously “squeeze” banks to boost their risk management under the capital adequacy rules.
Regulators are also expected to apply a stricter loan-deposit ratio that assesses banks’ liquidity, and a zero per cent loan-to-value ratio to existing homeowners, which bars them from borrowing completely.
Ref : Property Report
