Korean investors have been turning their attention toward the real estate market, reflected in an increase in mortgage lending, while cash flows in the equity market have been overall stagnant, recent data showed.
According to data released by the Bank of Korea last month, the outstanding balance of mortgage loans held by banks and other financial institutions here came to a combined 830.3 trillion won ($700.5 billion) as of September. The latest data is a noteworthy jump from the corresponding figures of 808 trillion won in 2018 and 770 trillion won in 2017, respectively.
On top of that, the total volume of mortgages extended by financial institutions gained 9.5 trillion won in the third quarter compared to 4.3 trillion won in the first quarter of this year, separate data from the central bank showed. The BOK cited a rise in the purchase of apartments and borrowers’ need for capital to pay for “jeonse” -- a home lease system unique to South Korea that requires tenants to pay a large sum of money as a deposit instead of submitting monthly fees -- behind the rise in numbers.
Both the combined assets held by institutions and increase in mortgage lending work as important barometers for local investors’ interest in the real estate market.
Meanwhile, combined deposits in brokerage accounts – including dormant ones where investors have yet to claim profits from investments – in Korea came to 24.8 trillion won as of last week, a Korea Financial Investment Association data showed. The figure has remained overall flat for nearly a year, indicating a lack of fresh investments amid a sluggish stock market, weighed on by risks stemming from global issues including the US-China trade war.
The outstanding balance of margin loans extended to investors for purchase of stocks traded on the benchmark Kospi and the secondary Kosdaq came to 9.3 trillion won as of Thursday. Though the figure hovered above the 10 trillion-won mark from February to early July, it fell below the line in late July. It has remained below the mark since.
“There’s a belief among South Korean investors that there’s a safety net on real estate prices -- that it won’t drop below a certain level,” said Hwang Se-woon, a senior researcher at Korea Capital Market Institute.
“Due to the belief, coupled with the sluggish stock market, the nation’s investment has been flowing into the real estate market,” he added.
The data comes as the government has adopted a slew of measures to tame soaring apartment prices here, including tighter lending rules and higher property taxes for expensive homes.