(Updates with presidential office urging senior officials to sell extra property, paragraphs 1, 6 - 7)
SEOUL, Dec 16 (Reuters) - South Korea on Monday announced new property market regulations, including tighter mortgage rules, to curb surging home prices, as presidential Blue House urged its senior officials to sell extra property they own to take the lead in calming the market.
The proposed rules include banning mortgage lending on properties valued over 1.5 billion won ($1.27 million), and lowering the maximum amount of mortgage lending on those valued at 900 million won or higher but less than 1.5 billion won, the government said in a statement.
The loan-to-value ratios will be lowered to as much as 32% from the current 40% for those valued between 900 million won and 1.5 billion won, and are expected to be effective as of Dec. 23, according to the statement. The mortgage lending ban on high-priced homes will be effective as of Dec. 17.
“Driven more by speculative investors seeking unreasonably high gains, there are needs to prevent property market disturbance and ensure stable supply and demand of properties,” Finance Minister Hong Nam-ki told a news conference.
Fast growth in property prices has frequently persuaded the central bank to raise interest rates or keep them unchanged when it could lower them.
Liberal President Moon Jae-in has come under criticism that not enough has been done to curb the spike in home prices, especially amid reports that some of his senor aides owned more than one home in areas that have seen sharp price gains.
After the announcement of new housing regulations, Moon’s chief of staff, Noh Young-min, urged senior Blue House officials to sell homes they owned in the capital region except their primary homes to take the lead in easing market overheating.
Monday’s measures come as analysts have predicted the Bank of Korea would pause for a while and watch the property market situation before deciding whether to deliver a third rate cut in the current easing cycle. The Bank of Korea already cut the key interest rate twice in July and October this year.
The government also said it will raise the home ownership tax to between 0.6% and 4.0% from the current 0.5% to 3.2%, the statement showed.
“(The government) will closely monitor the effect of the latest housing rules and it may also take additional steps to curb housing prices in the first half of 2020 if needed,” Hong added.
Last year, the government laid out plans to impose tougher taxes on property ownership to rein in owners of expensive homes blamed for stoking a speculative housing bubble in the main regions across the nation.
Apartment prices across the capital city of Seoul rose a modest 1.8% so far this year, according to Kookmin Bank data, but local media have reported prices soared by double-digit rates in selected towns in the city.
$1 = 1,179.3300 won Reporting by Joori Roh, Choonsik Yoo and Hyonhee Shin; Editing by Shri Navaratnam, Christopher Cushing and Himani Sarkar
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