President Lee Jae-myung signaled opposition to easing lending rules over surging property prices, saying that borrowers face paying at least twice as much interest as before once the five-year fixed-rate period on their mortgages expires. On concerns about a housing supply shortage, he forecast that conditions would "normalize from after 2028."
Lee made the remarks on the 19th at a tea meeting with reporters at the Chunchugwan press center of the Blue House, where he was asked about the sharp rise in property prices. "Government policy needs to be somewhat more detailed," he said. "From the government's standpoint, we have to reduce the amplitude of swings in property prices. Many people bought in, thinking prices would keep climbing like stocks, and ended up trapped. With property, we have to minimize such situations."
He continued: "For fixed-rate loans as well, when people who took out mortgages reach the end of the five years and the rate shifts to a floating one, they face paying at least two to two and a half times the interest they borrowed at before." The comments were read as a warning that lifting lending restrictions across the board could leave borrowers with an interest shock they cannot absorb once rates reset higher. "The judgment is up to each individual, but going forward, whether on loans or any other measure, we have to keep verifying in order to minimize cases that lack concrete justification," he said.
Lee pointed in particular to a supply shortage as the main cause of the current surge in property prices. "Permits, groundbreaking and the rest take at least three years, and in 2022 the volume suddenly fell by half," he said. "Three years on, the effects have started to arrive." He added: "Since taking office we have been trying to raise the number of housing starts beginning this year, but that creates a lag of three to four years. We have the policy goal of stabilizing the property market."
Rejecting the argument that his government is using taxes to curb home prices, he said: "That is not true at all. This is a matter of tax justice." He added, "I don't know when it will come, but there will be a kind of inflection point, and we need to prepare to minimize the shock."
On the recent slump in domestic equities, Lee assessed that "South Korea's stock market is still undervalued." He said: "A stock market cannot move in only one direction. It is also difficult for the government to intervene directly with an intent."
"It is clear that South Korea's stock market is undervalued overall," he said, citing corporate governance, market transparency, geopolitical risk and uncertainty over industrial and economic policy as the causes. Of those, he judged that uncertainty over industrial and economic policy had "improved considerably." He added: "We are also working to raise the transparency and fairness of the economy. What remains is distrust of the market and of corporate governance."
Lee said he was "continuously checking what needs to be done in policy terms to normalize the stock market," adding that he would "receive a comprehensive briefing before long and review the policies that are needed."