South Korea's Lee accused of skirting his own loan curbs with sale of apartment

SEOUL — South Korean President Lee Jae-myung is facing a backlash after documents showed he extended credit to buyers of his Seoul apartment who faced strict borrowing limits under his government's tough mortgage restrictions.

Lee has made stricter mortgage lending a centrepiece of his campaign to curb property speculation, and critics say his personal arrangement undermines his government's policy.

Under the lending rules championed by Lee, buyers of the apartment could have borrowed only a fraction of its 2.9 billion won (S$2.5 million) purchase price from a bank. 

Property records show the Lees became creditors to the buyers for nearly two-thirds of the purchase price.

"The president basically showed us how to skirt loan restrictions," the opposition People Power Party (PPP) said of the deal.

The controversy followed Lee's light-hearted remark to his cabinet after the sale that he was now "homeless", even though he will continue living in the Blue House presidential residence for the remaining four years of his term.

At a cabinet meeting on Tuesday (July 21), Lee warned that poor housing affordability could "ruin" the country and criticised people who exploit legal loopholes to amass wealth, but made no mention of his apartment sale.

Lee's office told Reuters in a statement that he sold the apartment below market value to show his commitment to normalising the property market, and the financing arrangement was made because of "circumstances on the part of the buyers".

The details of the sale were first reported by local media on Monday and became one of the most-read stories in South Korea over the last two days.

The arrangement drew widespread criticism online, with readers accusing Lee of making it harder for ordinary people to obtain housing loans while privately financing the sale of his own home.

Loan curbs under scrutiny for shutting out buyers

The median apartment price in densely developed Seoul was 1.25 billion won in June, equivalent to about 14 years' average salary, leaving many potential buyers and young people hoping to start a family feeling locked out of the market.

Lee's government tightened mortgage lending limits in greater Seoul last October, sharply restricting how much buyers could borrow.

Under those rules, buyers of Lee's apartment would have been limited to bank loans of up to 200 million won, or less than 10 per cent of the purchase price.

The property registry for the 164 sq m apartment seen by Reuters showed Lee and his wife signed a contract on July 16 transferring ownership to two buyers.

At the same time, the Lees secured a lien on the property for 1.8 billion won, becoming creditors to the new owners who were reportedly unable to pay the balance upfront.

"Because prices have risen so high and loans are so restricted, people are now resorting to this kind of arrangement instead," said Kim Yerim, a real estate attorney at law firm Sim Mok. "Now, to be clear, there's nothing illegal about the method itself. The issue is that it runs counter to the intent of the policy."

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