Young Adults Face Tough Bank Loans, Rely on Parents for Funding... Private Borrowing Hits Six-Year High

Lending Regulations Drive Over Half of Home Purchases by People in Their 30s to Use Gift and Inheritance Funds

Kim Jongyang: "Regulations Have Only Widened Early Wealth Transfer Channels... Paradox of Regulation"

The proportion of “private borrowing” sourced by people in their 20s from parents and others to purchase homes has reached its highest level in six years. As individuals in their 20s, who are just starting their careers, generally have limited cash and face difficulties obtaining loans from financial institutions, they are relying more on personal funding. There is growing concern that only young people with access to the so-called “parental chance” can enter the housing market.

According to an analysis on September 28 by Assemblyman Kim Jongyang from the Land, Infrastructure and Transport Committee, based on national audit materials received from the Ministry of Land, Infrastructure and Transport, out of 5,053 funding plans submitted by people in their 20s for contracts made between January and July this year, 2,224 cases (44.0%) fell under “other borrowings.” “Other borrowings” refer to private loans received from family or relatives, rather than from commercial banks. The number of funding plans involving gifts or inheritances also reached 2,445 cases (48.4%).

The rates of private borrowing and gifts/inheritance among people in their 20s were the highest recorded in the 2021–2026 data collected by the assemblyman’s office. The proportion of private borrowing among those in their 20s nearly doubled, rising from 23.9% in 2021 to 44.0% this year. The proportion involving gifts or inheritances also climbed 1.4 times from 33.8% to 48.4% during the same period.

The average purchase price of homes bought by people in their 20s in regions where they were required to submit a funding plan was 570 million won, of which their self-funded portion (money from bank deposits, proceeds from selling stocks or real estate assets, cash, etc.) amounted to only around 151 million won.

As a result, only those in their 20s who can combine gifts and intra-family loans are selectively accessing the housing market. Adult children can receive up to 50 million won in tax-exempt gifts from parents or other direct ascendants over a ten-year period. Starting in 2024, if marriage or childbirth requirements are met, an additional exemption of up to 100 million won applies. If neither exemption has been previously utilized, a maximum of 150 million won can be received without incurring a gift tax.

Due to tighter lending regulations, dependence on parents has also sharply increased for those in their 30s—a primary demographic of home buyers. During the same period this year, people in their 30s relied on 3.5 trillion won in gifts or inheritances when purchasing homes, exceeding half of the total gifts and inheritances (6.8797 trillion won). The rate of reporting gifts/inheritances (35.6%) and private borrowing (30.5%) in the funding plans each jumped by 7.1 and 8.8 percentage points from the previous year, reaching their highest levels in the past six years.

Assemblyman Kim commented, "When the government raised taxes to encourage homeowners to sell, the market responded instead by passing homes down to children. Rather than releasing more homes onto the market, punitive taxation further restricted supply and opened a broader channel for the early transfer of wealth—a paradox of regulation."

This content was produced with the assistance of AI translation services.