July 28, 2020 08:40
A growing number of young Koreans borrow heavily to buy even overpriced apartments while they still can amid a slew of confusing government regulations to stem real estate speculation.
According to the Financial Supervisory Service, Koreans in their 30s accounted for 36 percent of the W288.1 trillion in new housing loans taken out by commercial banks from June of 2018 to May this year (US$1=W1,197).
Data from June 2019 to May of this year shows fresh loans taken out by those in their 30s grew from W43.9 trillion to W58.8 trillion. Loans to people in their 20s also grew by W4.5 trillion. One staffer at a commercial bank said, "This is an unusually steep increase."
As more and more young people borrow money to buy apartments, prices of homes on the outskirts of Seoul are surging. The prices of apartments in Nowon, Gangbuk, Geumcheon and Gwanak districts increased almost 30 percent over the last three months.
Market analysts say people who live in rental homes in central Seoul area have started panic-buying cheaper homes on the outskirts for fear that property prices are going to rise even more. In fact, however, they are the very force that is driving prices up.
The sharp growth in debt is naturally driving up the default rate. The default rate among people in their 20s in June increased 0.8 percentage point, the only increase among all age groups.
Ha Joon-kyung at Hanyang University said, "Excessive loans shouldered by people in their 20s and 30s lead to an ever lower birthrate and slows spending, which could end up threatening the country's economy."
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