Young South Korean home buyers test Yoon's vow to resolve affordability crisis
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Loading... - Boram Choi
- 20 Jul 2022
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Young South Koreans are buying homes in defiance of sharp rate rises that has once again put the spotlight on a severe housing shortage, complicating President Yoon Suk-yeol's plans to ease a property affordability crisis in Asia's fourth-biggest economy.
Oh Ye-seul, a 26 year-old who works at a start-up firm in Seoul's posh Gangnam district, is the sort of individual who finds little or no sway in Yoon's pledges.
In March, when Yoon swept to power amid anger over his predecessor Moon Jae-in's failures to tame runaway home prices, Oh bought an apartment at a price slightly under 600 million won ($466,236), about half an hour's subway ride from her office.
Such purchases, which an increasing number of young Koreans are pursuing, are being made despite rapid interest rate hikes by the Bank of Korea and suggest the public remain sceptical of Yoon's vow to ease an affordability crisis that has eluded successive administrations.
Moreover, it also raises broader economic implications as mortgage rates have spiked to nine-year highs, adding to strains on households saddled with the world's highest debt loads and a global surge in prices for everything from petrol to food to consumer items.
While much of the buying is being fuelled by the fear of missing out on a property due to soaring prices, the risk down the road is of a sharp housing correction, and consumption downturn.
“The continued snapping up of homes by young people is coming at a time when interest rates are rising fast, so consumption could be hit as many will be forced to cut back on their living expenses," said Park Sung-woo, an economist at DB Financial Investment.
"South Korea’s household debt is reaching some dangerous levels, and we need to see a slowdown in homebuying and mortgage growth to ease that risk.”
Total debt held by South Korea's households, worth $1.5 trillion or 104% of country's gross domestic product, is higher than any other 35 countries tracked by the Institute of International Finance. Read More…
