Some have recently argued that the housing oversupply should be curbed, expressing concerns about the potential price fall. Adding fuel to the debate, mortgage loan expansion driven by the claimed housing oversupply is pointed to as a possible trigger of household debt default. A fall in housing prices combined with growing household debt can significantly undermine the national economy. To address the potential risks of household insolvency, the financial authorities are pursuing a policy which employs “non-deferred repayment by installment” as the default for mortgage loans.
However, the claim that non-deferred repayment by installment dampens the housing market needs to be examined. Decreasing housing transactions have pushed up the cost of renting, which has, in turn, led the government to introduce policies to normalize the housing market and outlay funds to expand the supply of rental houses. This report, therefore, examines the potential oversupply of housing and the status of the household debt and analyzes the impact of the uniform application of non-deferred repayment by installment for mortgage loans on housing purchases.
According to the analysis, current outstanding mortgage loans, including collective loans, pose a low risk of worsening the vulnerability of household debt. Delinquency and non-performing loans of household debt constantly occur, only varying by amount. Therefore, the financial authorities need to create an environment where financial institutions have more discretion in reviewing and determining potential risks involved in lending and need to support financial markets in diversifying mortgage loans with reasonable conditions. In addition, as it is difficult to determine with certainty whether there is a housing oversupply, the government needs to provide more accurate and detailed housing market data to avoid unnecessary debate.
With the implementation of the Basic Act on Housing, the government needs to maintain housing costs at affordable levels for the public, and to this end, a sufficient supply of housing to meet the demand is essential. In addition, housing prices fluctuate constantly, sometimes regardless of the social welfare changes. This implies that the government needs to reconcile the policies to stabilize housing prices with the policies to improve housing conditions of the public.