BOK proposes 'Korean-style New REIT' as solution to household debt

The Bank of Korea has proposed the introduction of "Korean-style New REITs" as a solution to the rise in housing prices in the Seoul metropolitan area and the resulting increase in household debt.

At a joint policy symposium with the Korean Financial Society, the Bank of Korea announced a plan to introduce "Korean-style New REITs" jointly studied with Professor Kim Kyung-min of Seoul National University.

'Korean New REITs' refers to a type of housing in which individual investors can invest in REITs, that is, real estate investment companies, and earn gains on equity investment after living in houses built or purchased by REITs for 5 to 10 years.

Lee Chang-yong, governor of the central bank, said the mid- to long-term solution to the household debt problem would require a change in the real estate finance structure focused on real estate loans, and "Korean-style New REITs" could be an alternative.

Lee stressed that housing finance through REITs is an institutional change that fundamentally changes the structure of household assets and debts, and to make this a reality, it is important to change the perception of all stakeholders, including households, financial companies, investors and policy authorities.