The Bank of Korea diagnosed that the rate of increase in housing prices and household debt in Korea is too fast.
The BOK announced today (15th) in the 'Business Status' report submitted to the National Assembly's Planning and Finance Committee, "As housing prices rise rapidly, there is a significant gap between basic purchasing power, such as income, and the speed is faster than that of major countries."
Based on that, I heard that the ratio of house price to income (PIR) in the fourth quarter of last year was higher than that of the United States, Germany and the United Kingdom (1.07 times) when compared to the fourth quarter of 2019 a year ago. .
The BOK pointed out that household debt also increased significantly in the course of responding to COVID-19, and the ratio of household debt to gross domestic product (GDP) has risen to 105.6% as of the second quarter of this year, and the gap with the long-term trend has also widened to 5.3 percentage points (p). I did.
The BOK warned, "Accumulation of financial imbalance is a factor that not only increases the vulnerability of the financial system, but also increases the downside risk of the real economy."
The BOK explains that when funds are directed to a specific sector, such as real estate, it increases economic volatility and weakens growth potential when an internal or external shock occurs.
The BOK added, "If household debt exceeds an appropriate level, consumption may be constrained due to the debt repayment burden."
Regarding the direction of monetary policy, he said, "The BOK plans to normalize its monetary policy stance in line with changes in financial and economic conditions."