The gap between rent and house prices has narrowed to the lowest margin in nearly five years, according to an industry report Friday, which indicates the latest symptom of a freefalling property market, The Korea Times reported. According to Real Estate 114, a housing market research firm, the average ``jeonse’’ prices in Seoul are now measuring up to 39.77 percent of purchase prices as of September, the highest level since 41 percent in the fourth quarter of 2005.

Creditors of Hyundai Engineering & Construction Co. Friday launched the sale of their 34.88% stake in the construction firm, in a deal that could fetch them $3 billion and potentially set the stage for a fight between Hyundai Engineering's former sister companies, The Wall Street Journal reported. The creditors, in a public announcement published in a local newspaper, said the deadline for letters of interest in the stake will be on Oct. 1. The deadline for the formal bids is Nov. 12, and they seek to name a preferred bidder in December.

South Korea's National Pension Service, the world's fifth-largest pension fund, has committed to invest $300 million in troubled real estate through Townsend Group, the latest sign that foreign investors increasingly are venturing into the down-on-its-luck U.S. property market, Dow Jones Daily Bankruptcy Review reported. The pension fund has committed to invest the money in a separately managed account with Cleveland-based Townsend. It primarily will focus on snapping up stakes in distressed private-equity real-estate funds and recapitalizing these funds.

The higher requirements for the capital base of banks under the so-called Basel III proposition will not affect Korean banks, a government official in charge of the issue said Wednesday, The Korea Times reported. To the envy of many European and American institutions, Korean banks need not shrink their assets or raise more capital, because they already meet those strict capital-to-asset standards, said Kim Yong-beom, director general of Seoul’s G20 committee.

Korean banks are facing a bumpy road ahead in their move to fix their balance sheets already spoiled by massive defaults in project financing, with a growing number of loans to small- and medium-sized enterprises (SMEs) becoming insolvent, The Korea Times reported. What is of more concern is that banks will have to pile up more loss reserves for loans to SMEs as drastic restructuring slated for October will drive many debt-loaded firms into bankruptcy.

South Korea will ease mortgage lending rules and extend tax breaks to encourage buyers back to the property market after home sales slumped to the lowest level in almost a year and a half, Bloomberg reported. Banks will be allowed to ease restrictions on mortgage loans for first-home buyers and owners of one residence until the end of March, the government said in an e-mailed statement yesterday. The waiver for taxes on home sales will be extended by two years until the end of 2012, the government said.

Mahindra & Mahindra, India’s foremost producer of sports utility vehicles (SUV), took the first step to acquire Ssangyong Motor, Korea’s smallest automaker, after the two signed a memorandum of understanding Monday, The Korea Times reported. Early this month, Mahindra was picked as the preferred bidder of the flagging Korean carmaker. After completing due diligence, both sides are set to finalize a definite agreement later this year, possibly in November.

Household and corporate debts are continuing on an upward trend, spawning fears that they will combine to create a toxic cocktail for the Korean economy with the prolonged slump in the real estate market, The Korea Times reported. The central bank said Tuesday that households and corporate lending reached 1,409 trillion won ($1.2 trillion) in June, as a low interest rate led them to take out loans from financial companies.

About three in 10 households suffered from a deficit in the second quarter, the worst figure in six years, and further confirmation that the ongoing recovery has not yet benefited the household economy, The Korea Times reported. According to Statistics Korea, 28.1 percent of households sustained a deficit from April to June, up 0.3 percentage points compared to the same period in the previous year. It is the worst ratio in the comparison of the same quarter since 2004, when 28.2 percent surveyed said that their expenditure surpassed their “disposable” income.

Cash-strapped South Korean car maker Ssangyong Motor Co., still under bankruptcy protection, Friday said improved sales helped narrow net losses in the second quarter, with an expanded product lineup in the second half to further boost earnings in the second half, Dow Jones Daily Bankruptcy Review reported. The net loss narrowed to KRW21.54 billion ($18 million) in the three months ended June 30 from KRW177.17 billion a year earlier, the result of higher sales and debt-rescheduling associated with its court-ordered bankruptcy protection, Ssangyong said in a statement.