**Surplus in Q4 Last Year, Lowest in Five Years**
While the overall average is recovering, it shrinks alone.
‘The disposable income of households classified as middle-class, those in the top 40-60% income bracket, has decreased for three consecutive quarters and has fallen below 700,000 won for the first time in five years. Household income has increased, but large jumps in costs like acquisition and registration taxes from real estate purchases, interest, and education expenses are the cause. Concerns have emerged that the “real estate FOMO” (fear of missing out) and the burden of private education costs are weighing down the middle class and negatively impacting the domestic market.’
According to the National Statistics Portal (KOSIS) of Statistics Korea on the 24th, the surplus (in real terms) of households in the third income quintile (top 40-60%) for the fourth quarter of last year was calculated to be 658,000 won, a decrease of 88,000 won from a year ago. This is the lowest level since the fourth quarter of 2019 (653,000 won) and the first time in five years that it has fallen below 700,000 won. The surplus amount refers to the remaining household funds after subtracting non-consumption expenditures like interest and taxes, and consumption expenditures such as housing, food, and clothing costs from income.
The surplus for households in the third quintile exceeded 900,000 won just four years ago, but it has been decreasing sharply since the transition to the COVID-19 endemic phase. It has declined in all eight quarters since the third quarter of 2022, except for the second quarter of 2023 and the first quarter of 2024. Since the second quarter of last year, it has decreased for three consecutive quarters, with the rate of decline also increasing. This contrasts with the trend where the average surplus for all households has increased for two consecutive quarters recently, showing signs of recovery.
The reduction in surplus for households in the third quintile is largely due to increased consumption expenditures in health, transportation, and education fees, as well as increased non-consumption expenditures like interest. The non-consumption expenditures for the third quintile in the fourth quarter last year (777,000 won) increased by 12.8% from the previous year. This is the highest amount and largest increase since household income and expenditure statistics began to be compiled together in 2019.
Among these, interest expenses increased by 1.2% to 108,000 won, returning to an upward trend and surpassing 100,000 won again after just four quarters. The acquisition and registration taxes associated with real estate purchases have increased, causing non-recurring taxes (55,000 won) to rise nearly fivefold (491.8%), further reducing household disposable income. Expenditure on education (145,000 won) rose by 13.2%, significantly outpacing the average increase in education costs for all households (0.4%).