Analysis: South Korea's property market has abruptly gone from sizzling hot to floundering, piling pressure on some of the world's most debt-saddled consumers as the sector experiences the fastest interest rate hikes on record
Prices of Seoul apartments last week reported their sharpest decline in 26 months, while transaction volumes in the capital dropped 73% in June from a year earlier.
"My husband's pay now isn't enough to cover our monthly repayment so I need to cut my maternity leave short and return to work," said Jeon, who had initially planned to take 15 months off. With services and commodities consumption from construction investment accounting for about 15% of economic activity, a property slump, combined with dwindling exports, would pose a big drag on growth."South Korea's financial system is one of the most vulnerable in the world to interest rate hikes, as the debt increase over the pandemic has been one of the highest," said Seo Young-soo, an analyst at Kiwoom Securities.
Regulators have sought to mitigate the impact of any household debt on the wider financial system by offering borrowers a chance to refinance loans at a fixed rate. That relief came just two weeks after the BOK's supersized rate hike this month.
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