[1mm Finance Talk] Group Loans Decline for 8 Consecutive Months... Why?

Trends in Group Loans Shift from Fluctuation to Clear Decline
Group Loans Down by 8 Trillion Won as Mortgage Lending Rises by 19 Trillion Won
Banks Cautious on Group Loans Due to Household Lending Caps and Low Margins
Key Indicator of Housing Supply: Decline Driven by Fewer Large Complexes and More Unsold Units

The outstanding balance of group loans at major commercial banks has declined for eight consecutive months. This contrasts with the recent increase in general mortgage loans, unsecured loans, and overall household loans. The decline in group loans is attributed to banks' cautious stance due to limits on total household lending at each institution. Analysts also point to recent trends in the housing pre-sale market as a factor. The decrease in pre-sale and move-in volumes compared to last year, along with a rise in unsold units?especially in regional areas?has impacted group loan demand.

According to the banking sector on June 13, the outstanding balance of group loans at the five major banks (KB Kookmin, Shinhan, Hana, and NH Nonghyup Bank) stood at 156.2468 trillion won as of the end of last month. After peaking at 163 trillion won in September last year, the balance has decreased for eight consecutive months, dropping by about 8 trillion won. In contrast, over the same period, mortgage loans increased by approximately 19 trillion won, from 574.57 trillion won to 593.66 trillion won. Unsecured loans have also risen for three consecutive months.

Group loans are approved collectively for members and prospective residents in redevelopment, reconstruction, and pre-sale projects. In redevelopment projects, they are used for relocation and project costs, while in pre-sale markets, they cover interim and final payments.

While the outstanding balance of group loans has fluctuated slightly in the past, the recent eight-month decline marks a clear downward trend. Group loans typically increase in tandem with large-scale pre-sale or move-in events. However, despite demand from large complexes?such as over 10,000 households moving into Olympic Park Foreon in Gangdong-gu, Seoul, between late last year and March?the loan volume actually declined at most banks, with only a few exceptions.

Analysts say this decline is closely related to limits on total household lending at banks. With caps in place, banks have focused on mortgage and unsecured loans, which offer higher interest rates and better margins, leading to a less active approach to group loans. At the end of last year, banks raised interest rates on group loans as part of household loan management, and some even suspended final payment loans. This led to a reverse interest rate gap with secondary financial institutions, causing customers to shift to these institutions and reducing demand.

Some also attribute the trend to the easing of government real estate regulations. A commercial bank official explained, "Group loans often involve interim loans that are converted into final payment loans. However, with the three-year deferment of the mandatory occupancy requirement last year, it became possible to use jeonse deposits to cover final payments. As a result, when final payments are made with jeonse deposits, even the need for interim loans disappears, leading to a decrease in the outstanding balance."

However, despite the 'reset' of household loan limits at the start of this year, the subdued or declining group loan figures are seen as reflecting the current housing supply situation. The decrease in pre-sale and move-in volumes, along with a rise in unsold units, is considered a key factor.

According to real estate information provider Real Estate R114, the nationwide supply of new apartment units this year is projected at around 224,000, a decrease of about 10% from last year?the lowest level since 2023. In the first half of this year, the supply totaled 55,339 units, down 25.8% (19,238 units) from the same period last year. Move-in volume for this year is also expected to fall by 33% compared to last year (407,534 units), reaching 274,360 units. A senior banking official commented, "With both household loan management and reduced housing supply, group loans are barely being issued at all."

The increase in unsold units, especially in regional areas, is also affecting the decline in group loans. According to the Ministry of Land, Infrastructure and Transport, as of the end of April, there were 67,793 unsold homes nationwide, of which 26,422 were classified as 'malicious' unsold units?those remaining unsold after completion. This figure represents a 5.2% increase from the previous month. A banking sector official said, "Even when pre-sales occur, subscription shortfalls are increasing in regional areas, which means fewer loans are being issued. The rise in malicious unsold units can also impact group loan demand."

Looking ahead to the second half of the year, group loan demand may partially recover as pre-sale volumes are expected to increase compared to the first half. Household loan limits have also been managed from the beginning of this year.

However, with subscription competition heating up only in Seoul and polarization intensifying, banks are likely to be selective in issuing group loans. Competition will be fierce only for prime areas or large complexes. A banking sector official noted, "Group loans not only generate large-scale lending but also help attract future customers. In prime areas like Gangnam, there is the added benefit of securing PB-level clients, so banks naturally have a strong interest."