● Local Builders Face Existential Crisis

Analysis of Real Estate PF Insolvency Risks and Financial Market Crisis Prospects

[1] Impact of Financial Environment Uncertainty and Loan Regulations

Uncertainty is increasing in both the financial sector and the real estate market.
Although banks are mainly operating with safe loans and do not feel a major crisis, polarization is prominent within the financial sector and throughout the real estate industry.
As the government reduces the loan limit per borrower by strengthening loan regulations and DSR, actual borrowing capacity is gradually decreasing.
Due to this, a balloon effect appears, pushing vulnerable borrowers into the high-interest loan market.

[2] Real Estate PF Insolvency Issues and Expansion of Construction Industry Risks

PF insolvency issues are expanding not only to simple housing PFs but also to commercial and knowledge industry PFs.
The construction industry has a higher proportion of substandard loans than other financial sectors, making the risk of insolvency serious.
In particular, local construction companies and small to medium-sized construction companies are suffering from unsold and overdue issues, increasing the proportion of non-performing loans.
As the real estate market stagnates, problems such as unsold units, vacancies, and uncompleted pre-sales are simultaneously exposed.

[3] Government and Financial Institution Responses and System Improvements

The government has implemented active support measures to prevent the spread of financial and construction industry insolvency.
Financial institutions are strengthening loan screenings and must manage the risks of high-risk loans.
In terms of the system, efforts are being made to strengthen safety measures at construction sites, such as labor costs and fair management, to prevent the spread of the crisis.
In addition, it is necessary to quickly process loan losses and prepare new demand-oriented financial support measures.

[4] Future Prospects and Importance of Risk Management

In the short term, risk management and conservative loan operations are key.
In the long term, effective risk management and system improvements are essential to prevent high-interest loan defaults related to PF loans from spreading to the entire financial system.
Large construction companies and financial institutions that are already prepared are likely to withstand the crisis. However, if the insolvency of small local construction companies and financial institutions spreads, there is a possibility of an overall economic crisis.
In the future, both the government and financial institutions must respond carefully to stabilize the financial and real estate markets.

Overall, with uncertainty in the financial and real estate markets,
Vulnerable borrowers are pushed into high-interest loans due to loan regulations and DSR strengthening.
PF insolvency and unsold units are exacerbating the risk of construction industry insolvency.
The government and financial institutions must actively engage in system improvements and risk management.
Through this, the PF financial crisis should be prevented from spreading to an overall economic crisis.

[Related Posts…]
Real Estate Market Outlook
PF Financial Crisis Analysis

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