"Regional Real Estate Slump Contrasts with Seoul: Real Estate Industry Loans Decline for Second Consecutive Quarter in 12 Years"

Due to the sluggish real estate market in regional areas, real estate industry loans decreased for the second consecutive quarter in the second quarter of this year. This marks the first time in about 12 years that real estate industry loans have declined for two consecutive quarters.

Yonhap News Agency

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According to the "Industry-specific Loans from Deposit-taking Institutions for the Second Quarter of 2025," released by the Bank of Korea on September 5, the outstanding loans to the real estate industry as of the end of June stood at 470.1 trillion won, down by 900 billion won compared to the end of the previous quarter. The last time there was a two-quarter consecutive decline was in the fourth quarter of 2012 (down 400 billion won) and the first quarter of 2013 (down 200 billion won), making this the first such occurrence in about 12 years.

Kim Minsoo, head of the Financial Statistics Team 1 at the Bank of Korea's Economic Statistics Department, explained, "This was influenced by the write-off and sale of non-performing loans due to the restructuring of real estate project financing (PF), which was triggered by the sluggish regional real estate market." According to the Korea Real Estate Board, the rental price index for medium and large-sized commercial properties in the second quarter of this year decreased by 0.4% compared to the same period last year. The decline has been accelerating since the second quarter of last year. Data from the Ministry of Land, Infrastructure and Transport on unsold homes after completion also show a steady increase, from 11,000 units at the end of 2023 to 21,000 units at the end of last year, and further to 25,000 and 27,000 units in the first and second quarters of this year, respectively.

As real estate industry loans decreased for two consecutive quarters, the increase in service industry loans, which includes real estate, also slowed to 7.2 trillion won in the second quarter, down from 7.8 trillion won in the first quarter. The slower growth in wholesale and retail, as well as accommodation and food service industries, also contributed to the overall slowdown in service industry loan growth. The construction industry also continued its decline, with loans decreasing by 200 billion won in the second quarter. This was influenced by the continued decrease in nominal construction completed, which fell to 35.7 trillion won in the second quarter.

In the second quarter of this year, the outstanding loans by deposit-taking institutions across all industries stood at 1,994 trillion won, an increase of 14.5 trillion won from the end of the previous quarter. However, the pace of increase slowed compared to the previous quarter's 17.3 trillion won rise.

By industry, the increase in loans slowed mainly in manufacturing and service sectors. Manufacturing loans increased by 6 trillion won, but this was a smaller increase compared to the previous quarter's 8 trillion won. Kim explained, "Although policy loans for the semiconductor industry led to a greater increase in the electronics, computer, video, audio, and telecommunications sectors, the disappearance of seasonal factors such as the renewal of credit lines in the first quarter resulted in a slowdown in working capital loan growth." Policy loans for the semiconductor industry are planned to be operated at a total scale of 7.65 trillion won this year under the Korea Development Bank's special program to support semiconductor facility investment. The increase in loans for wholesale and retail (+3.3 trillion won) and accommodation and food service (+1.2 trillion won) sectors also slowed due to reduced demand for funds as business conditions improved.

By purpose, working capital and facility loans increased by 8.8 trillion won and 5.7 trillion won, respectively, in the second quarter, but the pace of growth slowed compared to the previous quarter. Working capital loans saw a greater increase in construction and service industries, but a reduced increase in manufacturing, leading to an overall slowdown. This was due to the disappearance of seasonal factors such as the renewal of corporate credit lines at the beginning of the year. For facility loans, the manufacturing sector (+3.3 trillion won) saw a greater increase, especially in electronics, computers, video, audio, and telecommunications, due to policy loans for the semiconductor industry. However, the service sector (+2.5 trillion won) was affected by a decrease in the financial and insurance industries, resulting in a slower overall increase.

By type of institution, deposit banks (+14.3 trillion won) saw a slightly larger increase, while non-bank deposit-taking institutions (+200 billion won) experienced a slower increase. By company size, deposit banks saw a greater increase in loans to large enterprises (+7.5 trillion won), while the increase for small and medium-sized enterprises (excluding sole proprietors, 5.7 trillion won) slowed. Loans to sole proprietors (+700 billion won) increased at a faster pace.

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