Real estate prices have risen sharply over the past few years, and the average assets of the 2030 generation have also increased. However, people of the same generation who couldn't buy real estate quickly fell to the brink of a cliff, and it is urgent to restore housing to address inequality. In this context, the new government's plan is to release the restriction on loans and support the actual demand of "buying one's own home," but it has been pointed out as a problem that household loans, which have increased slightly during the interest rate hike period, could be a bigger burden on the Korean economy.
According to the analysis of the assets by household characteristics (2017-2021) of the National Statistical Portal (KOSIS) on the 15th, the average assets of all households under 29 years of age increased 22.8% from 98.82 million won in 2017 to 121.4 million won in 2021.
Especially for those in their 30s who enter the real estate market in earnest, the average asset jumped 38.8% from 288.24 million won to 417 million won during the same period. This is the largest increase in assets among all age groups, along with 38.8 percent in their 40s.
The reason why the assets of the 2030 generation increased so rapidly is because the 2030 generation took the "buy a home" train due to the sudden rise in real estate prices.
In fact, according to the Korea Real Estate Agency's monthly housing sales statistics by age, the number of home purchases in their 30s, which fell below 10,000 as of January 2019 (9,986) when related statistics began to be compiled, soared. As a result, the number of cases exceeded 30,000 for the first time in July 2020 (30,330,000), and reached 34,005 in December of the same year.
To this end, the Moon Jae In government has implemented high-strength lending regulations, including lowering the mortgage loan ratio (LTV) in areas subject to adjustment to 50 percent for LTVs under 900 million won and 30 percent for LTVs over 900 million won. At the end of the year, the financial sector joined in to block credit loans by strengthening the ratio of principal and interest payments (DSR), thereby preventing household debt from increasing.
Park (38), who has been working for nine years this year, said, "I think I missed my last chance to buy my own house in Seoul. It is now difficult to make a subscription and make a general sale." He also said, "With the choice of moment, it has become difficult to catch up with not only housing anxiety but also the widening wealth gap with friends."
Currently, the new government plans to re-establish the housing ladder for real consumers. Therefore, the LTV will be reduced to 80 percent for first-time home buyers. The current LTV is 40 percent (60 percent for the first time) in speculative areas and overheated speculative areas, and 50 percent (70 percent for the first time) in areas subject to adjustment. In addition, if it is not the first home purchase in a lifetime, the LTV will be unified to 70 percent regardless of the region.
Lee Young-man, a professor at Seoul National University, said, "Most households cannot afford to buy a house at once and use finance. Under the current lending regulations, housing can be prepared only if they have half the capital."
"The focus is on reducing the total amount of loans without considering the ability of households to pay," he said. "In order for housing finance to play its original role, reasonable adjustment of LTV and total debt repayment ratio (DTI) is necessary."
Kim Sang-bong, an economics professor at Seoul National University, said, "Young people need to borrow more than their income when buying a house, but what young people want now is not rental housing or rent.
However, there are many side effects on the new government's easing of lending regulations. This is because the hasty deregulation of loans could stimulate household loans, which are the detonator of the Korean economy.
According to the Bank of Korea's "Financial Market Trends in April 2022," the balance of household loans in the banking sector increased 1.2 trillion won to 1060.2 trillion won as of the end of last month. Lee Chang-yong, president of the Bank of Korea, also said in a written reply to the National Assembly at the time of the confirmation hearing that stabilizing the increase in household debt is an urgent policy task.
Writer: James Ko
(Picture from Unsplash)
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