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South Korea has announced a fresh set of housing and financial measures aimed at increasing housing supply and improving access to homes for young people and newly married couples. The Financial Services Commission will raise policy support for construction project financing to at least 47.8 trillion won, or about USD 33.72 billion, from the earlier planned 26.3 trillion won. The government will also introduce new policy loans for young buyers and newlyweds purchasing homes for their own use, while keeping restrictions on speculative demand. The move comes amid rising house prices, household debt concerns and pressure on President Lee Jae Myung's government to address the housing market.
South Korea has announced a new package of financial and housing measures to increase supply and make home purchases easier for young people and newlyweds, as the government seeks to contain rising property prices.
The measures announced by the Financial Services Commission (FSC) include higher financial support for construction projects and new policy loans for young people and newly married couples who are purchasing homes for their own use. At the same time, the government plans to maintain or tighten measures aimed at limiting speculative housing demand.
The FSC will raise policy support for construction project financing to at least 47.8 trillion won, equivalent to around USD 33.72 billion, from the previously planned 26.3 trillion won. The increase is intended to support construction activity and help expand housing supply.
The government is also changing its approach to household debt growth. South Korea has some of the highest household debt levels globally and has maintained strict borrowing rules to limit excessive mortgage and household lending. Under the latest plan, the FSC said it would manage debt growth at around 3% this year, compared with its earlier target of 1.5%.
The financial measures are being introduced alongside housing tax proposals announced by the government in the past week. Those proposals include higher property holding taxes for wealthy and multiple homeowners, while providing relatively favourable treatment for single-home owners. The government has said the tax changes are intended to discourage housing from being treated primarily as an investment asset and help stabilise prices. The proposed tax reforms are scheduled to be submitted to parliament by September 3.
President Lee Jae Myung has increased pressure on his government to address the housing market as prices continue to rise. During a meeting with senior aides, Lee warned that the property market had reached a level that required immediate attention. He also cautioned that continued excessive investment in real estate could create longer-term economic problems similar to the prolonged stagnation experienced by Japan.
The latest housing package follows several weeks of concern over property prices and the government's handling of the market. In a Gallup Korea survey released in late July, Lee's approval rating stood at 51%, marking the third consecutive weekly decline. Real estate policy was the most frequently cited reason among respondents who gave a negative assessment of his administration, accounting for 22% of such responses.
House prices have also become a growing political concern for the administration. The Reuters report noted that prices had risen in June at their fastest pace since late 2021, adding to pressure on the government to balance measures aimed at controlling speculation with policies that support genuine homebuyers.
The government has therefore adopted a two-sided approach. Financing support for construction is being expanded to encourage more housing supply, while targeted lending measures are being introduced for people who intend to occupy the homes they purchase. At the same time, restrictions on speculative borrowing are being retained or tightened to prevent additional credit from adding to price pressures.
The approach also reflects the difficulty of managing South Korea's housing market while controlling household debt. Increasing access to mortgages could help younger households enter the housing market, but excessive lending could create additional financial risks. The FSC's revised debt-growth target indicates that the government is allowing some additional lending capacity while continuing to monitor overall household borrowing.
Sources Reuters
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