This study explores the housing finance role of financial institutions and ways to facilitate that role by appraising the state of housing finance and financial institutions for the working class in foreign countries.
In Korea, greater income amid the economic boom from 1986 to 1988 increased demand for housing and sparked speculative investment in housing. This led to an imbalance between supply and demand, and exceptionally poor conditions in the Korean housing market. Even though more housing was supplied in an effort to address the supply-demand imbalance and stabilize housing prices, housing issues remain unresolved, indicating a lagging housing market. As the real-name-based financial transaction system was introduced along with the liberalization of interest rates, housing funds will be more efficiently created and distributed. After these developments, it is necessary to reexamine housing finance.
Korean housing finance can be divided into two categories: regulatory housing finance, which is provided by general financial institutions and lenders specialized in housing loans, and non-regulatory housing finance including private loans, private funds and financial assistance from families and friends. Key deposits on leased houses are mostly non-regulatory housing funds. Nevertheless, polices for housing finance are not yet fully developed, and there is a chronic shortage of supply for housing. Even though various forms of housing finance exist, they fail to alleviate demand. Moreover, the National Housing Fund and Housing and Commercial Bank only focus on meeting a supply target for the year, passively responding to the changes to the housing market and the financial environment. In addition, there is no mechanism to liquidize capital to prevent it from long-term fixation. Financial institutions other than the Housing and Commercial Bank and the National Housing Fund do not have sufficient infrastructure for long-term financing and therefore passively participate in housing finance. As a result, housing finance by financial institutions within the regulatory system remains insufficient, and interest rates on private housing funds are consistently regulated. Recently, money has been concentrated in subscription deposits to buy new private apartments and loans, leading to less liquidity in the market. This is favorable only for individuals and institutions with significant financial capacity, and as such it urgently requires improvement.
Financial institutions for the working class, such as Mutual Savings and Finance Company, Community Credit Cooperatives, and Credit Union Cooperatives have grown dramatically since 1980. Despite the advantages that these organizations have based on their location, they only focus on general lending and deposits based on relatively favorable interest rates and customer bases consisting of local residents. Due to management by cooperatives and membership, small scale, and asymmetrical customer credit ratings, we should not expect any changes with these institutions following deregulation and financial innovation, as long as they remain within their regional boundaries.
When assessing into overseas institutions, the United States operates financial institutions dealing with housing finance that represent a substantial market share, such as the Savings and Lending Cooperatives that operate housing finance based on their secured savings deposits of individual customers, FHA Insurance which has characteristics of both savings and lending cooperatives, general banks, the Mutual Savings Bank that offers Veterans Affairs guarantee-based, collateral backed loans, and Credit Union Cooperatives that usually offer loans based on home mortgage backed bonds. Germany has the German Housing Savings Bank that operates self-financing based on long-term low interest rate savings, and mortgage banks that finance capital through mortgage bank bonds and issue bonds. France has diversified financial organizations dealing with housing finance such as commercial banks, farmers’ banks, savings banks, real estate banks, and financial companies.
Housing finance should be managed to address working-class individuals, who are the principal consumers of housing credit. Specifically, savings institutions local to customers, such as village fund banks, should increase lending for housing, stabilize housing situations of the working class each house size group, develop savings products to finance for the liberalization of interest rates, promote inflows of capital as a savings institution, provide tax benefits, offer financial assistance to improve existing houses, and collect housing data.
주택금융에 관한 서민금융기관의 역할강화방안(Methods to strengthen the housing-finance role of financial institutions for the working-class people)
서울 : 한국개발연구원
|Series Title; No||정책연구시리즈 / 94-11|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||KDI; KDI School|