Foreign investment banks (IBs) don't expect South Korea's property market to get a boost from the government's new housing policy in the short term largely because anticipations of an increase in home prices remain weak, a report showed Thursday.

On Monday, the government announced a set of measures aimed at boosting the country's sluggish real estate market. It included tax breaks for first-time homeowners and a cut in the supply of new homes to keep prices from falling further.

According to the report by the Korea Center for International Finance (KCIF), Daiwa Securities said a recovery in housing demand comes with expectations that property values will climb.

Unless the government further eases rules, such as more tax benefits for owners of multiple houses, it will be hard for South Korea to see its property market rebound, the Japanese investment bank said.

Credit Suisse noted that an upbeat forecast and improved sentiment on the economy are essential factors for a rebound in the real estate market.

South Korea's property market has been suffering from a prolonged slump, hurting construction businesses and the overall economy, amid record high household debt reaching 959.4 trillion won ($858.9 billion) as of the end of December.

Citigroup warned that the new policy could put a drag on the recovery if the parliament delays the approval of the new measures.

In contrast, BoA-Merrill Lynch projected the new housing policy will benefit metropolitan regions. Nomura forecast that the new measures will have a positive impact and said property prices are expected to bottom out in the first quarter, according to the KCIF report. (Yonhap News)