IN Yongin, a satellite city south of Seoul, orange construction cranes are racing to build gleaming new high-rises, but realtor Kim Woong-jib says he is pointing would-be apartment buyers to older buildings.

    The city of a million people has 5,301 unsold new residential units, government data show, the most in South Korea and a symptom of a growing housing glut that is worrying policymakers.

    Developers, egged-on by interest rates at all-time lows, are building apartments at a record pace, one bright spot in an otherwise sluggish economy.

    But the home-building boom has fuelled a surge in borrowing. South Korea’s household debt, already the highest among emerging markets, threatens to choke off consumer spending and has prompted the government to step in to prevent a damaging crash.

    In places like Yongin, the flood of new apartments also means re-sale prices could suffer.

    “They are building way too much, it’s irresponsible,” said Kim, a real estate broker in Yongin for 10 years.

    “I can’t possibly recommend these new ones to my customers when I’m sure they will lose money,” Kim said.

    The total number of housing units launched in the first half of this year in South Korea rose 3.7 percent to 299,000. In 2015, construction began on a record 720,000 new residential units, government data show.

    A sluggish economy and fastest aging population among OECD countries, however, are keeping a lid on demand.

    Unlike markets such as Hong Kong, Singapore and Sydney, South Korea has low immigration and few foreign buyers to stimulate sales and prices.

    The looming oversupply is a hangover of persistently low rates and a loosening in 2014 of the cap on the mortgage loan-to-value ratio, moves intended to stimulate the economy.

    That fuelled a surge in homebuying that prompted a tightening in lending rules in January in an effort to tame ballooning household debt.

    In the June quarter, household credit grew an annual 11.1 percent to a record high of 1,257.3 trillion won (US$1.1 trillion).

    At 88.4 percent of 2015 GDP, South Korea’s household debt even exceeds that of the United States and Japan, Bank for International Settlements data show.

    On Thursday, the government announced further steps to rein in household credit, saying it will encourage households to take out fixed-rate loans, not interest-only ones, by cutting some fees. Guidelines for stricter bank lending standards and curbs on the supply of new housing were also announced. (SD-Agencies)