"To Normalize PF, Korean-Style Real Estate Development Project Evaluation Model Must Be Introduced"

Jugeumgong, 20th Anniversary Housing Finance Conference

A proposal has been made to introduce a 'Korean-style Real Estate Development Project Evaluation Model' to normalize the domestic real estate project financing (PF) market.

On the afternoon of the 31st, Kim Byung-guk, head of the Research Planning Team at Korea Housing Finance Corporation (HF), attended a housing finance conference discussion held at the Bankers' Hall in Jung-gu, Seoul, commemorating the 20th anniversary of HF's founding. He stated, "The current PF crisis is due to the unique characteristics of domestic PF."

Kim pointed out the structural features of domestic PF as ▲ high interconnection among bridge loans, main PF, and pre-sale proceeds ▲ low equity capital and high leverage ▲ strong credit enhancement by third parties such as construction companies ▲ expansion of financial support through PF securitization ▲ increased participation of secondary financial institutions in real estate PF.

He added, "It is necessary to establish an integrated real estate PF statistical system that consolidates the status of development projects related to finance, construction, and administration, enabling monitoring by financial institutions, developers, and construction companies." He emphasized, "A model that can professionally and objectively evaluate development projects reflecting the unique and structural characteristics of domestic PF must be introduced."

Meanwhile, at the conference held to mark HF's 20th anniversary, presentations were made on HF's past achievements and future directions. Ko Je-heon, head of HF's Policy Research Team, noted, "The level of public intervention supporting housing purchase demand in OECD countries has increased compared to before the global financial crisis, and Korea's related demand is also rising." He pointed out, "There is a need to consider housing finance policies that take into account household-to-household financing and asset formation mediated by Korea's unique characteristic of rental deposits (Jeonse)."

In the subsequent discussion, Professor Hong Jeong-ui of Handong University also stated, "Because Korea experiences high volatility in the housing finance environment depending on the housing market cycle, the government and others should provide predictable services to financial consumers." Professor Lee Jin-man of DePaul University in the U.S. added, "Policies to ease unnecessary regulations are needed to secure liquidity and stability in the housing market in response to demographic and social structural changes."