SEOUL (Reuters) – South Korea’s housing prices plunged in October to their steepest decline in at least 19 years. It spurred hopes that the country’s central bank will slow the pace of rate hikes in the coming weeks.
Condo prices in South Korea fell 1.20% nationwide in October, according to the Korea Real Estate Commission. This is the biggest monthly decline since his data series began in November 2003, as rising mortgage rates continue to tighten demand.
In the capital city of Seoul, apartment prices fell 1.24%, the sharpest drop since December 2008 and the ninth straight month of decline.
A national index of condominium transaction prices fell 7.13% in the January-September period, marking the largest annual decline since the data was introduced in 2006.
Bank of Korea widely expected to raise interest rates (KROCRT=ECI) After raising rates by a total of 250 basis points since August last year to curb inflation, it raised rates by 25 basis points on November 24.
Rising costs of living are eroding household incomes and dampening consumption prospects in Asia’s fourth largest economy, where private consumption accounts for about half of gross domestic product.
Analysts expect a final rate of 3.25% or 3.50% for the rest of the year and just one or two more rate hikes by the Bank of Korea in 2023.
Some financial institutions such as Citi and Morgan Stanley have raised the possibility that the current BOK tightening cycle will end at 3.25% over the past week as growth and headwinds to growth intensify. worry Regarding the credit crunch in the money market.
“Historically, the real estate market has been one of the most important variables for South Korea’s monetary policy, and is closely linked to the world’s highest household debt as a percentage of GDP,” Moon Hong-cheol said. . , an economist at DB Financial Investment.
South Korea’s household debt-to-GDP ratio reached 102.2% in the second quarter, according to data from the Institute of International Finance for 35 major economies.
“Excessive tightening could have irreversible consequences, and a soft landing in the property market will require the BOK to properly reflect market conditions in its monetary policy decisions,” said DB Financial’s Moon. There is,” he added.
Governor Su Yeon-kyung says the current pace of rate hikes is need to mitigate An economic slowdown due to spillover effects from local credit crunch.
Over the past five years, Seoul housing prices have more than 2 times It started as a home search backed by the economic stimulus package and has turned into a national pastime, even as loan restrictions have tightened and many millennials have been pushed into financial hardship.
Reported by Cynthia Kim. Edited by Lincoln Feast.
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