This photo taken March 18, 2025, shows apartment complexes in Seoul. (Image courtesy of Yonhap)
SEOUL, April 3 (Korea Bizwire) — Nearly half of all debts held by individuals and businesses in South Korea are real estate market-related loans, which may stymie economic growth and undermine financial stability, the central bank said Thursday.
The country’s total real estate credit amounted to 1,932.5 trillion won (US$1.32 trillion) as of end-2024, accounting for 49.7 percent of the total credit extended to individuals and businesses, according to a report by the Bank of Korea (BOK).
Real estate credit has expanded significantly in recent years, reaching 2.3 times its 2013 level as of last year.
In the report, real estate credit refers to the total of household real estate loans, including mortgages, and corporate loans for property and construction projects.
The central bank presented the report during a joint conference with the Korea Institute of Finance held in Seoul.
The increase came as households have continued to increase investments in real estate by using leverage as the housing market has demonstrated higher longer-term returns compared with other assets.
Accordingly, real estate assets accounted for 64 percent of total household assets in South Korea, far exceeding the average of the Organization for Economic Cooperation and Development (OECD) member nations at 52.9 percent.
The number of companies in the real estate sector has also increased significantly in response to the recent market boom, while the government has provided low-interest loans to homebuyers who meet specific criteria.
“Such a trend could reduce capital productivity and constrain consumer spending, which would ultimately curb economic growth,” BOK official Yoon Ok-ja said.
“It is imperative to manage the growth of real estate credit within an appropriate range in the short term and to give incentives to financial institutions for productive corporate lending in order to mitigate the credit concentration in the real estate sector and boost funds for more productive sectors.”
(Yonhap)
