Household Debt Growth Slows to Lowest in 14 Years

  • By Kim Eun-jung

    May 23, 2019 12:47

    Household debt growth slowed to the lowest level in 14 years thanks to tough government measures to curb loans and raise taxes on real estate to deter speculators from borrowing money for new homes.

    Market insiders said the slowdown is good news but also voiced concerns that the cooling real estate market and consequent decline in construction investment could pose headaches down the road.

    The Bank of Korea said Wednesday that outstanding household credit, which consists of household loans and credit card spending, stood at W1,540 trillion at the end of the first quarter, up 4.9 percent from the same period last year but still the lowest rate of increase since the fourth quarter of 2004 (US$1=W1,191).

    Household debt had soared around 10 percent on average each year from 2015 to 2017. Debt during the first three months of this year rose by W3.3 trillion, which is only a fraction of the W17.4 trillion increase of the same period last year and the massive W22.8 trillion growth in the fourth quarter.

    Real estate sales fell to 145,000 units, compared to 213,000 in the previous quarter. According to the Ministry of Land, Infrastructure and Transport, apartment sales in the swish Gangnam area of southern Seoul, a favorite target for speculators, fell 70 percent from the average in the last five years to just 3,418 apartments.

    Kim Hyun-wook at the Korea Development Institute said no recovery in the real estate market is expected for at least one or two years.

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