House prices were down 1.46% during the year to Q3 2022
After a surge in house prices in recent years, South Korea’s housing market is now slowing rapidly, amidst the recent introduction of stricter lending criteria and interest rate hikes. House prices fell by 1.46% in Q3 2022 from a year earlier, a sharp turnaround from the previous year’s 17.64% growth. On a quarterly basis, house prices dropped 1.48% in Q3.
The housing market is slowing rapidly, mainly due to the recent imposition of market-cooling measures. In December 2021, the Financial Services Commission (FSC) unveiled its decision to apply stricter rules for jeonse loans – a housing lease system whereby tenants pay a refundable lumpsum deposit instead of monthly rent on a two-year contract. Then in early-2022, banks announced stricter lending rules for borrowers. For instance, borrowers with total loans of over 200 million won that need to repay more than 40% of their annual income in principal and interest are barred from getting additional loans.
In November 2022, Bank of Korea (BOK) raised its key interest rate by 25 basis points to 3.25%, its ninth consecutive rate hike since August 2021 and the highest level since June 2011, in an effort to rein in inflationary pressures. As a result, overall inflation slowed to 5% in November 2022, down from 5.7% in the previous month. Inflation reached 24-year high 6.3% in July 2022.
Rents, rental yields: data unavailable in S. Korea
Recent news. South Korea’s trade-reliant economy expanded by 3.1% in Q3 2022 from a year earlier, following year-on-year expansions of 2.9% in Q2 and 3% in Q1, amidst robust private consumption and fixed investment, according to BOK. On a quarterly basis, the economy grew by 0.3% in Q3 2022.
Based on BOK’s Economic Outlook released in November 2022, the Korean economy will grow by a modest 2.6% this year and by another 1.7% in 2023, following a 4% expansion in 2021 and a 0.9% contraction in 2020.