Property market experts say South Korean homeowners are holding off from selling their homes after the Bank of Korea’s surprise interest rate cut to 1.75 percent last week, while potential buyers are also cautious.

“The rate cut is definitely a favorable factor to the market but property owners are hesitating to sell their homes, concerned that prices might rise further. Home buyers, on the other hand, hover in indecision as prices have increased recently,” said Kim Kyung-sook, CEO of a real estate agency in Seoul.

“For the time being, purchasers and house owners are expected continue to monitor changes in the property market,” she said.

Experts forecast the rate cut to have a limited impact, saying a long period of low interest rates has desensitized the market to an additional cut.

“The government’s package of measures to boost the sluggish real estate market and the rate cut have an impact on the market, but an increase in the number of housing transactions could have been spurred without the rate cut,” said Hwang Kyu-won, a researcher at the Daishin Economic Research Institute.

In August, South Korea loosened banks’ mortgage restrictions as Finance Minister Choi Kyung-hwan sought to revive a stagnant property market, boost growth and stimulate domestic consumption.

“The ultracheap money policy will boost the number of people who buy properties to lease, rather than those who want to buy a house to live in,” a real estate agent said.

For instance, more than 15,000 people visited a show house, opened a day after the rate cut announcement, for a studio apartment built by Daewoo Engineering & Construction over the weekend.

A Daewoo E&C official said there was a surge in investors’ interest in houses or apartments available for rent or lease after the rate cut.

Following the central bank’s move to cut its key interest rate to a record low of 1.75 percent on Thursday, local banks plan to lower their mortgage loan rates to under 3 percent, from the average rate of 4.6 percent in 2012.

By Park Han-na (hnpark@heraldcorp.com)