Real Estate Investment Increases with Loan Easing While Household Disposable Income Decreases

Source: Bank of Korea

As real estate investment increased following the easing of loan regulations, our households' surplus funds decreased in the third quarter of last year, continuing the trend from the second quarter.

According to the provisional 2023 third quarter flow of funds statistics released by the Bank of Korea on the 4th, the net fund operation scale traded by households and non-profit organizations during the second quarter was recorded at 26.5 trillion won.

This is a significant decrease compared to the 33.8 trillion won recorded in the third quarter of 2022. It also slightly declined compared to the 28.6 trillion won recorded in the second quarter of 2023.

Net fund operation refers to the amount obtained by subtracting fund procurement amounts such as financial institution loans from fund operation amounts such as deposits, stocks, bonds, and insurance, indicating the surplus funds of each economic agent.

The Bank of Korea explained that in the third quarter of last year, the government eased real estate loan regulations, leading to an increase in housing transactions and a decrease in household surplus funds. According to statistics from the Korea Real Estate Board, the number of housing transactions in the metropolitan area in the third quarter of last year was about 68,000 units, a significant increase compared to 43,000 units in the same period the previous year.

Accordingly, due to loan demand related to housing purchases, household fund procurement, mainly long-term loans, increased significantly. On the other hand, as surplus funds decreased, fund operation amounts, centered on financial institution deposits and bonds, declined.

The net fund procurement scale of non-financial corporations expanded to 33.4 trillion won, up from 21.1 trillion won in the previous quarter.

The fund operation sector decreased mainly due to financial institution deposits and trade credit, and fund procurement shifted from net borrowing to net repayment as stock issuance and trade credit decreased compared to the previous quarter.

A Bank of Korea official explained that this was due to a decrease in net profit caused by rising oil prices and increased expenses such as Chuseok bonuses, leading to an expansion compared to the previous quarter.

This content was produced with the assistance of AI translation services.