Korean housing market forecast to slow in 2017

South Korea's housing market is expected to begin losing steam from 2017, foreign investment banks said Monday, amid growing concerns over an oversupply.

"After reaching its peak next year, the local housing market will likely turn bearish starting the following year due to an excessive supply and the authorities' tightened regulations on mortgages to curb the record household debt," Credit Suisse Group was quoted as saying by the Korea Center for International Finance.

Household credit soared to an all-time high of 1,166.4 trillion won ($1.01 trillion) in the third quarter, according to the Bank of Korea, sparking concerns that the chronic headache will sap consumption and trigger credit risk once rates begin trending higher.

JP Morgan expected the local property market to continue to enjoy a boom for the time being, but also pointed to signs of a slowdown down the road.

"The growth in the demand for new homes is attributable to the government's policy to vitalize the real estate market and the rise in prices for 'jeonse' houses," JP Morgan said, citing the local property lease system where a tenant pays a large deposit in place of monthly rent.

According to the report by the state-run Korea Development Institute, home transactions spiked 21 percent on-year in the third quarter to hit 290,937.

"The growth will be limited in a few years factoring in a constant increase in the number of construction permits for new homes and tougher rules for screening mortgages," it said. "Whether the real estate market would go vivid depends on the increase in household income."

The number of new home permits issued came to 64,200 in October, a 41.2 percent surge on-year, according to the Ministry of Land, Infrastructure and Transport. (Yonhap)