Korea's real estate PF delinquency ratio climbs on quarter in December

Financial Supervisory Service Gov. Lee Bok-hyun speaks in a meeting with heads of finance and construction companies in western Seoul on Thursday. [YONHAP]

The outstanding real estate project financing (PF) loans and their delinquency ratio both climbed in December from a quarter earlier as the property market remains unstable.

The outstanding real estate PF loans grew 1.4 trillion won ($1.05 billion) over three months to 135.6 trillion won at the end of December, according to Financial Supervisory Service (FSS) data on Friday.

Outstanding loans rose 1.8 trillion won at banks and 1.5 trillion won at brokerage firms, while those at insurance companies and savings banks decelerated 1.3 trillion won at banks and 200 billion won at brokerage firms.

The delinquency ratio for PF loans in the entire finance industry rose 0.28 percentage points to 2.7 percent over the same period. The rate jumped 1.38 percentage points at savings banks, followed by 0.35 percentage points at banks, while the rate at brokerage firms dropped 0.11 percentage points and at insurance companies fell 0.09 percentage points.

The FSS said the delinquency ratio of the PF loans “is being maintained at a stable level overall” as the rate is low compared to the past crises and there is a low level of unsold properties.

The delinquency ratio reached 13.62 percent at the end of 2012 following the savings bank crisis in 2011, when people rapidly took out deposits following the news of their insolvency as their risky real estate bets went bad.

The number of unsold properties totaled 62,000 units at the end of last December, compared to 166,000 units at the end of 2009 following the 2008 global financial crisis.

“The FSS is encouraging the restructuring and selloff of projects with low profitability via auctions,” FSS Gov. Lee Bok-hyun said in a meeting with chiefs of financial and construction firms Thursday. “We will work to ease the financial pressure of the construction industry by reviewing whether interest rates and commissions for PF loans are being charged reasonably in accordance with the level of the loan risks.”

The number of PF projects that have been put out for auction totaled 120 as of last September, accounting for some 4 percent of the total.

“It’s difficult to confirm when” the delinquency ratio will start to fall, FSS Deputy Gov. Kim Byung-chil said. “The market hasn't given off any unusual signs,” he added, noting the smooth trading of the asset-backed commercial papers, a short-term investment vehicle, issued by construction developers.

The Finance Ministry on Thursday pledged to expand the guarantee for PF loans and accept more companies applying for government support funds for the normalization of PF projects.

BY JIN MIN-JI [jin.minji@joongang.co.kr]