KB Kookmin Bank limited mortgage loans to 300 million won and Shinhan Bank suspended new MCG and MCI product enrollments from July 10, effectively reducing loan limits by 50 million won, following a June surge in household loans. In June, bank household loans increased by 7.6 trillion won, representing half of the first-half total of 15.7 trillion won, with mortgage loans rising 4.3 trillion won to the highest level since June of last year. Lee Chang-moo, a professor at Hanyang University, stated that the housing ladder is being cut off, as the function of mortgage loans is to provide housing purchase opportunities based on the stable future income of young people. With Seoul apartment average prices at 13 billion won and mortgage limits at 300 million won, buyers now require approximately 10 billion won in equity capital to purchase property in Seoul. Financial authorities announced plans to release additional regulatory measures targeting non-resident single-homeowners at the end of this month.
Bank Mortgage Restrictions Create 10 Billion Won Equity Barrier
KB Kookmin Bank imposed a 300 million won cap on mortgage loans, while Shinhan Bank halted new enrollments in its MCG (Mortgage Credit Guarantee) and MCI (Mortgage Credit Insurance) programs from July 10, effectively reducing available loan amounts by 50 million won. The restrictions followed a June household loan increase of 7.6 trillion won at banks, which accounted for half of the 15.7 trillion won rise recorded in the first half of the year. Mortgage loans alone grew by 4.3 trillion won in June, marking the largest monthly increase since June of the previous year. With Seoul's average apartment transaction price at 13 billion won, prospective buyers now need approximately 10 billion won in self-funded equity to complete a purchase under the new lending constraints. Lee Chang-moo noted that the measures undermine the original purpose of mortgage lending, which is to enable younger generations to access homeownership through expected income growth.
Gyeonggi Province Housing Prices Surge Despite New Regulations
During the first week of July (as of July 6), apartment prices in the Seoul metropolitan area rose 0.22%, up from 0.20% the previous week, with Seoul increasing 0.30% and Gyeonggi Province advancing 0.23%. Hwaseong Dongtan maintained a 1.29% gain even after being designated a regulated area, while Yongin Giheung's increase accelerated from 0.39% to 0.56% and Guri's from 0.30% to 0.64%. Adjacent areas not subject to new restrictions also posted larger gains: Hwaseong Byeongjeom rose 0.25%, Namyangju 0.21%, and Suwon Gwonseon 0.26%. Suwon Yeongtong's weekly price growth tripled from 0.41% to 1.19% in a single week. Nam Hyuk-woo of Woori Bank Real Estate Research Institute attributed the price movements to optimism about the semiconductor industry's business cycle, with demand shifting from southern Gyeonggi areas to relatively more affordable neighboring regions. Jeonse (long-term rental deposit) prices also rose in tandem, increasing housing cost burdens for actual residents.
Property Tax Projected to Exceed 10 Trillion Won Under Fair Value Adjustment
The National Assembly Budget Office projected that raising the fair market value ratio for comprehensive real estate tax from the current 60% to 80% would increase residential property holding taxes to 10.0658 trillion won in 2026, a 15.7% rise from current levels. If the ratio reaches 95%, total holding taxes would climb to 10.7726 trillion won, representing a 23.8% increase. Seoul's residential property taxes would jump from 4.5191 trillion won to 5.4721 trillion won under the 80% scenario, a 21.1% surge. Per-capita comprehensive real estate tax would rise from 3.24 million won to 6.24 million won at the 80% ratio, and to 7.8 million won at 95%. The analysis indicated that high-value properties and multi-home owners would face the steepest tax burden increases. Among major cities, Seoul recorded the largest projected percentage increase in property tax liability.
Government Extends Tax Exemption for Non-Capital Region Unsold Housing
The government plans to extend the tax exemption for post-completion unsold housing in non-capital regions by one year through the end of 2027, including the measure in a tax revision bill to be released at the end of this month. The exemption allows single-home households to retain one-home tax benefits—including 1.2 billion won capital gains tax exemption, up to 80% long-term holding deduction, and 1.2 billion won comprehensive real estate tax basic deduction—when purchasing additional post-completion unsold units outside the capital region with floor space of 85 square meters or less and acquisition value of 700 million won or less. As of May, non-capital region units accounted for 83.6% (24,522 units) of the nationwide total of 29,350 post-completion unsold homes. A government official explained that accumulated unsold inventory in regional areas could lead to construction sector slowdowns and weakened consumer sentiment. Hong Ki-yong, emeritus professor at Incheon University, assessed that even with the extension, potential buyers may hesitate due to uncertainty about future tax policy changes, limiting the measure's effectiveness in stimulating demand for regional housing.
Global Bond Yields Rise Amid Geopolitical Tensions
On July 8 (local time), the US 10-year Treasury yield rose 2.9 basis points to 4.581%, reaching its highest level since May, as military tensions between the United States and Iran escalated. Brent crude and WTI prices surged 4% to 5%, heightening inflation concerns. The June FOMC minutes revealed that a minority of committee members discussed the need to consider raising the benchmark interest rate in light of Middle East conflict developments. The minutes indicated that nearly all members judged that some degree of tightening would be necessary if upside scenarios materialized. Japan's 10-year government bond yield also climbed to 2.90%, marking the highest level since September 1996—approximately 30 years. The simultaneous yield increases across major bond markets reflected growing tensions in global fixed-income markets.
FAQ
What did KB Kookmin Bank and Shinhan Bank do in July regarding mortgage loans?
KB Kookmin Bank limited mortgage loans to 300 million won, and Shinhan Bank suspended new enrollments in MCG and MCI products from July 10, effectively reducing loan limits by 50 million won.
Why did South Korean banks impose stricter mortgage lending limits?
The restrictions followed a June surge in household loans, with bank household lending increasing by 7.6 trillion won—half of the first-half total—and mortgage loans rising 4.3 trillion won to the highest monthly level since June of the previous year.
How much would property taxes increase if the fair market value ratio rises to 80%?
The National Assembly Budget Office projected that raising the ratio to 80% would increase 2026 residential property holding taxes to 10.0658 trillion won, a 15.7% rise, with per-capita comprehensive real estate tax jumping from 3.24 million won to 6.24 million won.
