Bank of Korea's first-half financial stability report

DSR for low-income multi-property households more than double that of high-income peers

A view of a villa and multi-unit residential neighborhood in Hwagok-dong, Gangseo-gu, Seoul. [Yonhap]
A view of a villa and multi-unit residential neighborhood in Hwagok-dong, Gangseo-gu, Seoul. [Yonhap]

A widening gap in loan repayment capacity among multi-property owners has emerged based on income level, according to a new report. While multi-property owners generally maintain a sound debt-to-asset ratio — meaning they could sell their holdings to repay loans — a growing warning signal is emerging for low-income multi-property holders, whose monthly cash flow is insufficient to cover loan principal and interest payments despite owning multiple homes.

Experts say the government should develop an exit strategy to encourage these owners to voluntarily offload their assets in an orderly manner.

According to the Bank of Korea's financial stability report released Tuesday, the debt service ratio for low-income multi-property households stood at 72.9%, more than double the 31.4% recorded for high-income multi-property households. Low-income multi-property owners are spending more than 70 percent of their income on debt repayment.

The debt service ratio for low-income multi-property owners exceeds the government's management threshold of 40% by more than 30 percentage points. This signals that any temporary bottleneck or external shock during the loan repayment process could translate into household-level financial risk.

The elevated debt service ratio among low-income multi-property owners is attributed to limited income and gap investment — a practice of purchasing homes using jeonse deposits to minimize upfront costs. Analysts say these owners are likely elderly individuals or small self-employed operators with modest earned or business income who bought multiple properties through jeonse arrangements or took on heavy borrowing to expand their real estate holdings. A typical example is households whose post-retirement income has shrunk due to aging but who rely on rental income to cover living expenses.

The problem is that while these owners could offset losses and prevent financial distress by selling their properties and realizing gains, they are reluctant to do so under the current market structure. As long as expectations for rising home prices persist, the tendency to hold on through debt — even while bearing property tax burdens — remains strong.

Experts warned that if this situation persists or an external shock materializes, a cascading domino effect including financial insolvency could follow. Even a modest rise in interest rates or a further income decline due to an economic downturn could immediately push these borrowers into delinquency, which in turn could drag both primary and secondary financial institutions into simultaneous distress.

Kim Jeong-sik, an emeritus professor of economics at Yonsei University, said the risk of insolvency among this group could escalate sharply during an economic downturn. He added that the government, already implementing measures such as regulations on non-owner-occupied housing and stronger property holding taxes, should take steps to encourage low-income multi-property owners to voluntarily list their properties for sale.

Kim also warned that if properties these owners can no longer afford are forced into auction or the owners go bankrupt, the fallout could spread into broader social harm — including "reverse jeonse" situations where tenants cannot recover their deposits, and jeonse fraud. Defaults are particularly likely to emerge in the more vulnerable villa and multi-unit housing market. When interest rates rise, landlords face higher borrowing costs while monthly rent income remains fixed, creating a negative margin that could ultimately be passed on to tenants.

Ahn Dong-hyun, a professor of economics at Seoul National University, said a low income does not mean an absence of assets, so the loan-to-value ratio can be relatively low while the debt service ratio or debt-to-income ratio appears high. He advised that accurately assessing both the scale of assets these owners hold and their actual collateral value is necessary to determine whether the distress is frictional or structural in nature.

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국내 증시가 유례없는 폭락장을 맞이하며 패닉에 빠진 가운데, 개인투자자들이 하루에만 10조원이 넘는 자금을 쏟아부으며 역대급 베팅에 나섰는데, 이날 코스피는 장중 90
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