Private Spending Declines Despite Real-Estate Boom

      December 20, 2021 09:06

      Private spending declined over the last decade even though apartment prices in Seoul went through the roof, according to a study by the Seoul Institute.

      An increase in income or asset value usually leads to a rise in spending, but in fact private spending edged down 0.104 to 0.118 percent for every one-percent increase in apartment prices in 25 districts in Seoul from 2010 to 2018.

      The study attributed the trend to people scrimping and saving to pay off their apartments. The apartment ownership ratio in Seoul stands at 48.6 percent as of last year, and many households took out loans to buy their apartments and were saddled with debt even if the property values rose.

      People take pictures of the Christmas decorations at Shinsegae Department Store in Seoul on Sunday. /Yonhap

      Even households with minimal debt did not sell their apartments to raise cash, which ended up failing to have an effect on spending.

      "Soaring apartment prices in Seoul did not lead to more private consumption," the institute said. "The loan interest burden ended up affecting household spending."

      The institute added the city government should provide more affordable rental homes, which would help stabilize apartment prices and alleviate loan restrictions.

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