The report from the Bank of Korea on the “Financial Stability Situation in September” highlights that, despite government measures to curb the overheating real estate market, the buying sentiment for houses in Seoul remains strong. Specifically, the measures announced on September 7, which aimed to expand housing supply, seem to have inadvertently increased the average price rise compared to May and broadened the range of areas experiencing price hikes.
The June 27 measures, which aimed to manage household debt, had a limited effect on curbing the increase in apartment prices in Seoul ten weeks after their introduction. While transaction volumes dropped significantly, with Seoul apartment sales falling from 12,131 in June to 4,362 in July—a 64% drop—the price increase slowed only slightly. Despite these measures, the increase in apartment sale prices in Seoul remained quite subdued compared to past interventions.
After the September 7 measures, the price increase spread to more areas, with several districts like Nowon, Dobong, Gangbuk, and others showing heightened price rise levels. Meanwhile, housing purchase sentiment remained steady, with the Consumer Sentiment Index (CSI) for housing price expectation rising for two consecutive months, indicating sustained anticipation of further price hikes.
Household loans saw a slowed growth after the June 27 measures but continued to rise, centered around housing-related loans. There also remains a concern over vulnerable borrowers, who are low-income or low-credit multi-loan receivers, estimated to hold significant household and self-employed debt.
Furthermore, the report indicates increased delinquency rates among these vulnerable borrowers since the second half of 2022, with a significant part of the debt at risk of becoming bad loans. Measures like strengthening credit risk management and supporting the recovery of self-employed incomes have been suggested, alongside policies aimed at debt adjustment and relief for burdensome interest payments. The report also sees potential benefits in recent fiscal policies like consumer coupons and financial support programs aimed at reducing the debt burden for these vulnerable groups.