Government: "Real Estate PF Delinquency Improving... Delinquency Rate Down to 3.42%"

Government Holds Real Estate PF Situation Review Meeting on the 19th
Improvement in PF Loan Delinquency Rate Since June Last Year
Non-performing Loans Also Being Reduced

Seoul Apartment Panorama Photo by Yonhap News

The delinquency rate of real estate project financing (PF) loans in the financial sector continued its downward stabilization trend. PF loans with concerns of insolvency also showed a decreasing trend.

On the morning of the 19th, related agencies including the Financial Services Commission, Ministry of Economy and Finance, Ministry of Land, Infrastructure and Transport, Bank of Korea, and Korea Asset Management Corporation held a 'Real Estate PF Situation Review Meeting' at the Korea Federation of Banks in Jung-gu, Seoul, and announced that the delinquency rate of PF loans in the financial sector fell by 0.08 percentage points from the previous quarter to 3.42% at the end of last year. The delinquency rate of PF loans in the financial sector surged from 2.70% at the end of 2023 to 3.56% at the end of June last year but has been gradually declining since then.

A Financial Services Commission official explained, "The delinquency rate of PF loans in the financial sector has been stably managed, maintaining the mid-3% range since the end of March last year due to strengthened risk management in the financial sector."

In the fourth quarter of last year, the amount of new PF loans handled was 17.1 trillion won, an increase of 700 billion won compared to the previous quarter. The amount of new PF loans has exceeded 15 trillion won for three consecutive quarters since the second quarter of last year, showing continuous new capital supply in the PF market.

As of the end of last year, the total PF exposure (including PF loans, bridge loans, debt guarantees, etc.) was 202.3 trillion won, a decrease of 8.1 trillion won compared to 210.4 trillion won at the end of September last year. This is because the reduction in exposure due to project completion, liquidation, and restructuring exceeded the amount of new PF exposure handled. The amount of loans with concerns or insolvency based on project feasibility evaluation was 19.2 trillion won at the end of last year, accounting for 9.5% of the total PF exposure, both the scale (229 trillion won → 192 trillion won) and proportion (10.9% → 9.5%) decreased compared to the end of September.

By the end of last year, 30.9% of projects with concerns or insolvency, amounting to 6.5 trillion won, had been liquidated or restructured. 4.5 trillion won was liquidated through public auctions, private contracts, and write-offs, and 2 trillion won of restructuring was completed through new capital supply and capital structure reorganization. Through a total of 6.5 trillion won in liquidation and restructuring, the PF non-performing loan ratio fell by 2.9 percentage points, and the PF delinquency rate also dropped by 2.0 percentage points, improving soundness indicators.

The authorities explained that by expanding the information disclosure platform for asset sale information, they continuously induce voluntary sales in the market, and specific sale negotiations are currently underway for 14 projects (500 billion won).

A Financial Services Commission official evaluated, "Considering the decline and stabilization of PF loan delinquency rates, the increase in new PF capital supply, and the liquidation and restructuring situation, the soft landing of real estate PF is being achieved within a predictable and manageable range." He added, "Of the 6.5 trillion won in loans that have completed restructuring and liquidation, 3.7 trillion won are loans for residential projects, which is expected to promote the supply of about 47,000 housing units in the future," and forecasted, "If the liquidation of remaining projects proceeds smoothly, it will contribute to the promotion of an additional approximately 92,000 housing units."