As Samsung Electronics moves to support up to 500 million won in low-interest housing funds for employees, in-house loans at large corporations are emerging as a new variable in the real estate market. The government is trying to curb household loans through mortgage loan regulations, but there is speculation that the expansion of in-house lending centered on large corporations could spur end-user home purchases and demand for moving up.
Experts say the impact could extend not only to the southern Gyeonggi region, where semiconductor corporations are concentrated, but also to key areas of Seoul. In particular, they noted that if large-scale liquidity is supplied outside the scope of government lending regulations, it could lead to upward pressure on home prices in certain areas.
According to the business community on the 8th, the "housing stabilization loan program" agreed to by labor and management at Samsung Electronics provides up to 500 million won at an annual interest rate of 1.5%. It covers not only employees without dwellings but also owners of a single home who plan to sell their existing home and move to a higher-tier area. However, the sale of the existing home and the purchase of the new dwelling must take place on the same day.
Eligible properties include single-family dwellings and multifamily housing such as apartments with sale prices of 2.5 billion won or less, pre-sale rights, and officetels. Repayment options are either 10-year amortization or 10-year amortization after a 3-year grace period. Although Samsung Electronics has 130,000 employees, actual demand for use is still hard to gauge.
Industry watchers expect Samsung Electronics' decision to influence unions at other large corporations. The SK hynix union, which is set to enter wage talks this month, is also likely to demand an expansion of housing fund support at a similar level. SK hynix currently operates a housing fund loan program of up to 100 million won.
Cho Nam-hong, head of labor law firm Daebo, said, "The in-house loan program, which has been run mainly by large corporations, public corporations, and the financial sector, could expand, spurred by the Samsung Electronics case," and added, "Unions could line up to demand an increase in the loan limit."
Through the June 27 real estate measures last year, the government has focused on reining in an overheated property market via finance, including capping the mortgage loan limit for the greater Seoul area at a maximum of 600 million won. However, since in-house loans operate separately from financial-sector lending regulations, critics say they could dilute the policy's effectiveness.
The biggest point of interest regarding in-house loans is the issue of creating a revolving mortgage on in-house loans. When an employee raises funds through an in-house loan, the loan-to-value ratio (LTV) or debt service ratio (DSR) is not reflected. That is because credit exposure is not shared with other financial firms.
However, if the company creates a first-priority revolving mortgage on the dwelling, the amount available for additional bank loans is reduced accordingly, limiting the effect of the in-house loan. Conversely, if no revolving mortgage is created, it does not affect the bank loan limit, significantly increasing the effective size of funding.
If labor and management at Samsung Electronics decide not to create a revolving mortgage on the in-house loan, combining the 500 million won in-house loan with a maximum 600 million won mortgage loan would allow a total of 1.1 billion won to be raised through borrowing. A Samsung Electronics official said, "We only agreed on the aggregates of 500 million won for the in-house loan, and additional agreement is needed on whether to create a revolving mortgage."
The real estate industry expects that the expansion of in-house loans will stimulate move-up demand in key areas of Seoul and the greater Seoul area. It could increase end-user demand to relocate to areas with strong school districts, transportation, and living infrastructure.
Kim Hak-ryeol, head of Smart Tube Real Estate Research Institute, said, "With regulations on owners of multiple homes still in place, demand that has secured additional funds is highly likely to concentrate in core areas of Seoul," and added, "As preference for higher-tier areas strengthens, polarization between regions could deepen."
Kim In-man, head of the Kim In-man Real Estate Research Institute, projected, "It could affect a wide range of preferred residential areas, including Seoul's Gangdong, Mapo, and Seongdong districts, as well as Bundang in Seongnam; Suji in Yongin; Gwanggyo in Suwon; and Dongtan in Hwaseong."