1 in 4 properties held by Chinese nationals in Korea use mortgage loans from Korean banks

A view of apartment buildings in Seoul on Oct. 22 / Yonhap

While the number of domestic real estate properties owned by foreigners in Korea is continuously increasing, Chinese nationals account for nearly 60 percent of all domestic mortgage loans to foreign nationals in Korea.

According to data submitted by the Financial Supervisory Service (FSS) to Rep. Suh Bum-soo from the ruling People Power Party (PPP), the balance of mortgage loans financed to foreign nationals from four major commercial banks ― KB Kookmin, Shinhan, Hana and Woori Bank — as of the end of June stood at 2.3 trillion won ($1.7 billion). The balance of home loans borrowed by Chinese citizens accounted for 1.33 trillion won, 57.9 percent of the total.

The balance of mortgage loans lent by the four major banks to Chinese nationals rose by 24.4 percent in three years. It is nearly twice the growth rate of home loans for all foreigners (12.6 percent) during the same period.

According to the statistics on foreign ownership of housing and land announced by the Ministry of Land, Infrastructure and Transport in May, the total number of houses in Korea that are owned by foreign nationals stood at 83,512, as of the end of last year. Out of that, 44,889, or 53.7 percent, are owned by Chinese nationals.

Given that the total number of cases in which Chinese borrowers were being financed by mortgage loans when purchasing real estate in Korea was found to be 12,234, as of the end of June this year, it means that roughly one out of four properties owned by Chinese people were purchased under finance from Korean commercial banks.

As interest rates soar, the delinquency rate of Chinese borrowers is also rising.

The delinquency rate in mortgage loans to Chinese borrowers fell to 0.09 percent at the end of 2020 and 2021, respectively, but then it rose to 0.18 percent as of the end of June this year. Although the rate is still in a low range, there are concerns that local financial institutions and tenants might have to bear the brunt of the potential risks associated with Chinese nationals' speculative housing transactions using bank money.

"There have been rumors that foreign speculators, particularly Chinese, came into the country during the period of rapid real estate price surges and made large profits. And the statistics show such rumors are proven to be true," Rep. Suh said.

"If there are foreigners who avoided financial regulations or taxation while joining speculative transactions and causing market disruptions, they should be strictly punished and the government needs to come up with measures to regulate such speculative moves," the lawmaker stressed.