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Over $2 trillion, or larger than the South Korean gross domestic product, went to real estate purchases or related market last year to underscore the extent of property frenzy amid soaring prices and lush liquidity, data showed.
According to data obtained by Justice Party’s lawmaker Jang Hyeyeong from the Bank of Korea, exposure of banks and other financial institutions to real estate reached 2,566 trillion won ($2.07 trillion) as of the end of 2021, adding 12.4 percent or 283 trillion won from a year ago.
The amount is equivalent to about 125 percent of the country’s nominal GDP last year.
Real estate exposure is measured by combining credit loans extended to households and real estate related companies and amount of money injected to real estate investment products.
The ratio of real estate financial exposure versus the GDP exceeded 100 percent for the first time in 2018 and then fast gained 23.5 percentage points over the following four years, suggesting faster growth in the real estate market than the economy.
Real estate exposure continued double-digit growth over the last two years– 10.4 percent (or by 215.5 trillion won) in 2020 and 12.4 percent (or by 282.9 trillion won) in 2021. Growth for recent two years amounts to 500 trillion won.
Lending to households took up nearly half of the exposure – 49.4 percent after adding 8.6 percent on year. Of the total, 55.2 percent was mortgage-backed loans.
Credit loans extended to real estate related firms grew 17.2 percent, and money injected into related investment products 13.5 percent.
If the loans go insolvent, financial institutions are liable for 1,341 trillion won or 52 percent of the entire real estate exposure – banks 55.9 percent and non-bank lenders 44.1 percent.
“Risk from real estate finance could easily spread to the real economy,” said Jang, calling for the need for deleveraging rather than easing mortgage-backed loans.
[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]
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