Foreigners are buying more properties despite the slowdown in the domestic real estate market. Roughly one in four domestic properties owned by Chinese nationals have been financed by loans from commercial banks.
The balance of mortgage loans granted to foreigners by four major commercial banks - KB, Shinhan, Hana, and Woori - stood at 2.304 trillion won as of the end of June, according to data released on Wednesday by Seo Beom-soo, a member of the National Assembly's Land Infrastructure and Transport Committee. This marks a 3.3 percent increase from the same period last year. The data was obtained by Seo from the Financial Supervisory Service.
The balance of mortgage loans foreigners received by the four major banks has been steadily increasing over the years. The figure, which stood at 2 trillion won in 2019, rose to 2.23 trillion won in 2020 and 2.45 trillion won in 2021.
As of June, the balance of mortgage loans granted to Chinese nationals stood at 1.338 trillion won, accounting for 57.9 percent of all mortgage loans issued to foreigners. In the past three and a half years, these loans rose by 24.4 percent from 1.719 trillion won at the end of 2019, which is twice the 12.6 percent increase in total mortgages provided to all foreigners during the same period.
The number of mortgage loans to foreigners stood at 17,949 as of June this year, with 68.2 percent of the loans (12,234 mortgages) issued to Chinese nationals.
The total number of houses in Korea owned by foreigners stood at 83,512 by the end of last year, according to data from the Ministry of Land, Infrastructure, and Transport. Chinese nationals owned 44,889 houses, accounting for 53.7 percent of the total.
The delinquency rate of foreign borrowers has also been rising with higher interest rates. Specifically, the delinquency rate for Chinese borrowers has risen from 0.12 percent at the end of last year to 0.18% as of June this year. Lending rates have increased from 3.89 percent to 4.26 percent per annum during the same period.
Although delinquency rates are not currently problematic, Seo argues that a potential increase could harm domestic financial institutions.
"During the real estate boom, there were rumors that foreign, particularly Chinese, speculative capital was involved in pushing up house prices and earning massive profits," he said. "And it turned out to be true, based on statistics."
"If there are foreigners who engage in speculation while evading financial regulations and taxes, causing market chaos, it is necessary to be strict and come up with measures to regulate them promptly," he added.
This article was originally published on Nov. 1, 2023.