“95% of development costs depend on loans… “A soft landing that repeats the crisis and fundamental structural improvement will be carried out in parallel.”
Choi Sang-mok, Deputy Prime Minister and Minister of Strategy and Finance. 2024.1.16 News 1
“Korean-style real estate project financing (PF) crashes one after another when sale prices plummet. “Under the current PF structure, the real estate crisis is bound to repeat itself.”
Deputy Prime Minister and Minister of Strategy and Finance Choi Sang-mok said this while appearing on KBS Sunday Diagnosis Live on the 21st and mentioned the Korean real estate PF crisis. Deputy Prime Minister Choi explained, “Unlike in developed countries where land is purchased with own capital, in Korea, loans are incurred from the time of land purchase. As 95% of total development costs depend on loans, the real estate PF structure is weak, unlike in advanced countries.” did.
Korean real estate PF is characterized by a high proportion of loans and continuous financing. You can run a business with little money, but the risk of insolvency is greater when profitability falls, such as a real estate recession. In particular, due to the lack of collateral assets, there is a high possibility that the risk will be transferred to the financial institution that provided the loan. Accordingly, structural problems are recurring, with financial authorities taking direct control every time there is a real estate PF crisis.
Deputy Prime Minister Choi said he would make a soft landing to prevent the real estate PF crisis from spreading to the financial sector and the people’s economy. He said, “We will make efforts to provide liquidity to normal PF businesses and restructure businesses that are at risk of insolvency,” and added, “We will also make fundamental improvements to the domestic real estate PF system through research services, etc.”
Meanwhile, as the real estate PF crisis became a reality, the target stock prices of domestic listed construction companies also fell sharply. Kolon Global’s average target stock price was 13,667 won as of the 18th, down 10.9% from the end of last year. In addition, the average target stock prices of Daewoo Engineering & Construction, Hyundai Engineering & Construction, and GS Engineering & Construction also fell by more than 1%. On the other hand, in the case of HDC Hyundai Development Company and DL E&C, the target stock prices have risen 10.2% and 8.1%, respectively, compared to the beginning of this year, and some say that construction stocks are picking good and bad.
Reporter Lee Dong-hoon [email protected]
2024-01-21 18:00:00
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