"House Prices Will Rise Further After One Year" Anxiety Fueled by Policy Distrust

Bank of Korea 'July 2020 Consumer Sentiment Survey'
3-Point Gap from All-Time High...Likely to Be Surpassed Soon

[Asia Economy Reporter Kim Eun-byeol] Even high-intensity real estate measures failed to quell the public's sentiment that housing prices would continue to rise. The Housing Price Outlook Consumer Sentiment Index (CSI), which surged just before last month's real estate policy announcement, rose again for two consecutive months even after the 6.17 and 7.10 measures were announced. At this pace, it seems likely to surpass the all-time high soon. The Consumer Confidence Index (CCSI) has been rising for three consecutive months, supported by government policies responding to the COVID-19 pandemic, but the rate of increase is gradually slowing down.

According to the 'July 2020 Consumer Sentiment Survey' released by the Bank of Korea on the 29th, the Housing Price Outlook CSI rose 13 points from the previous month to 125. Not only has it recovered to pre-COVID-19 levels, but it is only 3 points shy of the all-time high recorded in September 2018 (128). The CSI is a statistical index derived from surveys on consumers' perceptions and expectations of the economic situation. A value above 100 means that the number of households expecting housing prices to rise in a year exceeds those expecting a decline.

The survey was conducted between the 10th and 17th of this month, coincidentally right after the announcement of the 7.10 real estate measures, which raised acquisition tax, comprehensive real estate tax, and capital gains tax all at once. Policies focused solely on suppressing demand without appropriate supply measures have instead heightened public anxiety.

Kwon Cheo-yoon, head of the Statistical Survey Team at the Bank of Korea's Economic Statistics Bureau, explained, "Despite the government's strong measures, housing demand still exceeds supply, leading to actual price increases, which has influenced the Housing Price Outlook CSI. If this upward trend in apartment sale prices continues, it is possible to surpass the all-time high."

Overall consumer sentiment has risen for three consecutive months, but the rate of increase is diminishing. This month's CCSI stands at 84.2, up 2.4 points from the previous month. The rate of increase has slowed from 6.8 points in May, 4.2 points in June, to 2.4 points this time. The absolute value remains below 100, indicating pessimism.

Mr. Kwon stated, "Active responses such as emergency disaster relief funds have somewhat boosted consumer sentiment, but as the effect wanes, the rate of increase has diminished. Consumer sentiment is expected to be influenced by additional policy responses and the course of COVID-19."

The CCSI is an indicator calculated using six of the 15 indices that make up the CSI: current living conditions, outlook on living conditions, household income outlook, consumption expenditure outlook, current business conditions, and future business outlook. A value below 100 indicates that consumer sentiment is pessimistic compared to the long-term average (2003?2019).

This content was produced with the assistance of AI translation services.