BOK Evaluates "Reduced Real Estate Price Increase After Government Measures"

Bank of Korea Report to the National Assembly's Planning and Finance Committee
Lee Ju-yeol, Governor of the Bank of Korea, "Will Monitor the Concentration in the Real Estate Funding Market"

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] The Bank of Korea evaluated on the 24th that the rate of increase in real estate prices has somewhat narrowed following the government's announcement of measures to stabilize the housing market.

In a report to the National Assembly's Planning and Finance Committee on the same day, the Bank of Korea stated, "Housing sale prices expanded their upward trend after June as expectations for housing price increases rose, but the rate of increase somewhat narrowed after the June 17 and July 10 measures were introduced."

According to the report, the nationwide apartment sale price increase rate fell from 0.22% in the fourth week of June to 0.15% in the first week of July, then to 0.12% in the third week of July, and further declined to 0.12% in the second week of August.

However, the Bank of Korea's concerns are deepening as there are many criticisms that the liquidity in the market, which increased due to the Bank lowering the base interest rate to a historic low in response to the economic impact of the novel coronavirus disease (COVID-19) spreading since early this year, and the rise in loans due to low interest rates, have driven up real estate prices.

According to the Bank of Korea, corporate loans increased by 86.1 trillion won and household loans by 48.2 trillion won from January to July this year. In the case of corporate loans, both large corporations (26.1 trillion won) and small and medium-sized enterprises (60 trillion won) saw increases, supported by accommodative monetary policy and government and bank funding support. Household loans also increased significantly, mainly driven by demand for housing-related funds.

Liquidity is also expanding rapidly. The Bank of Korea explained that the increase rate of M1 (narrow money) rose sharply compared to M2 (broad money) due to a relatively large increase in demand deposit accounts. As of June, the year-on-year increase rate of M1 was 9.9%, while that of M2 was 21.3%.

Bank of Korea Governor Lee Ju-yeol said, "Going forward, the Bank of Korea plans to operate monetary policy accommodatively to support the recovery of the domestic economy," but added, "We will also pay close attention to changes in financial stability, such as the increase in household debt due to recent housing price rises and the concentration of funds in the real estate market."

He also added, "We will closely examine the development of COVID-19, its impact on domestic and international finance and economy, and the ripple effects of past policy responses."

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