At the end of last year, the amount of real estate finance exposure in our country exceeded 3,000 trillion won. As household real estate loans increased, mainly centered on housing mortgage loans, project financing (PF) loans showed a decline. The Bank of Korea advised that caution should be exercised to prevent exposure from expanding due to easing financial conditions.
According to the report titled 'Financial Stability Situation (March)' published by the Bank of Korea on the 27th, as of the end of last year, domestic real estate finance exposure categorized by type was as follows: ▲ real estate-related loans (household real estate loans, corporate real estate collateral loans, loans to real estate and construction sector corporations, and real estate PF loans, etc.) 2,681.6 trillion won; ▲ real estate-related guarantees 1,064.1 trillion won; ▲ financial investment products 375.9 trillion won. The total real estate finance exposure, obtained after summing all of these and eliminating duplicates, was slightly over 3,000 trillion won.
Looking at real estate finance exposure by institutional sector, household real estate loans were recorded at 1,309.5 trillion won as of the end of last year, marking an increase of 3.6% compared to the end of the previous year. Although non-residential collateral loans, such as commercial real estate, continued to decline due to deteriorating market conditions, including rising vacancy rates in retail spaces, the increase in housing mortgage loans had a significant impact.
Real estate collateral loans for corporations totaled 694.2 trillion won, an increase of 11.3% compared to the end of the previous year. The growth was still centered on non-housing mortgage loans, but the growth rate slowed compared to the previous year (13.1%). The Bank of Korea explained that the growth rate of loans in the real estate and construction sectors had decreased (from 4.4% to 1.8%).
Real estate PF loans were recorded at 187.3 trillion won, a decrease of 11.8% compared to the end of the previous year. While real estate PF loans had been growing rapidly, mainly in non-bank sectors such as mutual finance, the loan balance significantly decreased due to restructuring of real estate PF. Most sectors, including mutual finance, banks, insurance companies, and savings banks, saw a decrease in loan balances.
Real estate-related guarantees totaled 1,064.1 trillion won, an increase of 4.8%. The growth rate of business guarantees remained low; however, the increase was influenced by individual guarantees such as jeonse. Financial investment products related to real estate, including real estate funds and REITs, continued to show growth, but the increase rate significantly slowed from 11.0% at the end of 2023 to 3.7% at the end of last year, due to a decrease in mortgage-backed securities (MBS).
The Bank of Korea noted, "Real estate finance exposure shows a slowing increase due to restructuring efforts for distressed real estate PF, enhanced risk management by financial institutions concerning related sectors due to sluggish real estate market conditions. However, it also diagnosed that potential risks still exist in certain sectors, as household real estate loans continue to steadily rise, mainly centered on housing mortgage loans."
It added, "Going forward, easing financial conditions may stimulate the preference for risky assets like real estate, potentially leading to an increase in leverage for asset acquisitions. Therefore, it is necessary to be cautious to prevent financial concentration in the real estate sector."