Gov't policies fatten financial, real estate sectors only

By Nam Hyun-woo

The government’s policies to pump up the domestic economy are failing to help the lower or middle class, ending up fattening financial and real estate industries only, data showed Sunday.

According to Statistics Korea, the growth of service production indexes in sectors wherein the proportion of lower or middle class is high has been slowing in the second half of this year.

The food sector posted 9.5 percent growth year-on-year in June, but contracted by 1.8 percent in September. The transport sector’s growth also has been slowing from 7.8 percent year-on-year growth in June to 0.9 percent contraction in September.

Wholesale and retail sector growth also slowed from 6.1 percent to 0.4 percent.

This led the overall service production indexes to contract. Compared to the last year, the index in June grew 5.4 percent but slowed to 2.8 percent in September.

However in the same period, the production indexes in financial, insurance, real estate and house rental sectors have enjoyed strong growth.

The financial and insurance sectors grew 4.8 percent year-on-year in June and posted 7.9 percent growth in September. Banks’ loan businesses climbed 11.8 percent in September.

In recent months, domestic banks have been posting record highs in earnings due to expansions in their loan businesses. Five major banks here posted 927 trillion won ($810 billion) in their won-based loan balances in June, up 127 trillion won from September last year.

Their combined net interest margin in the first three quarters of this year was 17.15 trillion won, 15.9 percent year-on-year.

The real estate and house rental sectors also grew 5.7 percent year-on-year in September, faster than 0.3 percent in June.

The data showed that the government’s economic policies have adversely led to more bank loans to finance real estate.

The nation’s household debt is hovering around 1,300 trillion won amid the low policy rate. Leading the way was the increase in “collective loans” for new apartments.

The share of collective borrowing for mortgages increased to 48.7 percent at the end of June this year from 12.4 percent at the end of last year.

To cope with the soaring debt and speculative real estate investments, the government last week announced a real estate policy package aimed at restricting home transactions.

The government has virtually banned home purchasing rights in four overheated districts in Seoul ― Gangnam, Seocho, Songpa and Gangdong ― as well as Gwacheon in Gyeonggi Province.