Housing loan demand shows signs revival

Amid rising expectations that the government`s housing market measures will help boost the housing market, households` demand for housing loans is expected to hit its highest level in 30 months in the second quarter of this year.

According to the Bank of Korea`s survey of 16 domestic banks on their lending behavior released Wednesday, households` housing loan demand index posted 16 in the second quarter, surging from zero posted in the previous quarter. The figure matches that recorded in the first quarter of 2011 when home equity lending surged, and the highest level since 19 posted in the fourth quarter of 2010.

A reading below zero means that loan demand will decline, and a figure above zero indicates the opposite. Therefore, it can be interpreted that domestic banks are expecting housing loans to increase as they anticipate a rise in housing transactions.

Lending to small and mid-sized companies is also expected to increase as the launch of the new government boosts economic recovery expectations while government support for smaller companies expands. The loan demand index for small and mid-sized companies in the second quarter was 25, up 7 points from 16 in the previous quarter, and the highest figure since the first quarter of 2011 (28).

A Bank of Korea source said, "Households` housing loan demand is likely to increase considerably helped by the government`s new measures, acquisition tax exemptions that will last through June, and demand in the spring moving season. Lending by small and mid-sized companies is also likely to increase especially in sectors with high production and job effects thanks to regulators` demand for lending increase.

Banks` lending criteria are expected to remain eased. In the second quarter, banks` housing lending behavior index for households is 6, and lending behavior index for small and mid-sized companies 9, both unchanged from the previous quarter. Lending behavior index for general loans excluding housing loans, however, declined by 3 points from 6 in the previous quarter, indicating a higher lending barrier.

weappon@donga.com