[2030 Debt Warning] "Rising Real Estate and Asset Prices Give Youths a Sense of Deprivation, Driving Them to Debt Investment"

Young People Without Asset Growth Means Invest Through Loans
Rising Interest Rates Will Increase Interest Burden, Caution Advised
Youth Job Supply and Real Estate Stabilization Are Important

[Asia Economy Reporters Kiho Sung, Seungseop Song] Economic experts have pointed to the surge in real estate and asset prices as the primary cause of the exponential increase in youth debt. They noted that the rapid rise in real estate prices has caused a sense of deprivation among young people, leading to reckless investments.

With quality jobs gradually disappearing and interest rate pressures expected to increase if the base rate is raised within the year, experts urged swift measures to address the issue.

Experts also expressed caution regarding populist bills and pledges from the political sphere ahead of next year's presidential and local elections. They showed particular concern about ‘easy loan’ pledges targeting the youth demographic.

Asia Economy organized an in-depth roundtable discussion with economic experts to diagnose and discuss responses to the debt situation among the 2030 generation. Participants included Professor Daejong Kim from Sejong University’s Department of Business Administration, Professor Sangbong Kim from Hansung University’s Department of Economics, Professor Taeyoon Sung from Yonsei University’s School of Business, and Chairman Junggeun Oh of the Korea Financial ICT Convergence Society.

Increase in Debt Among the 2030 Generation Mainly Due to 'Real Estate'... Job Insecurity Also a Factor

- What are the causes of the increase in debt among those under 30?

▲ Professor Daejong Kim: Those under 30 are at an age where marriage is expected and require the most funds. However, housing prices have risen dramatically. They had no choice but to take out loans to secure housing funds. When funds fell short, they even had to borrow from secondary financial institutions. The concern grew as they borrowed heavily during a period of rising interest rates.

▲ Professor Sangbong Kim: While some demand for living expenses is inevitable, the biggest factor is that money flowed into asset markets such as real estate and stocks. In particular, new loans for home ownership surged sharply.

▲ Professor Taeyoon Sung: Under Korea’s rigid labor market structure, the costs and risks associated with new employment have increased, making it harder for young people to find jobs. The primary cause of increased debt is the rise in borrowing as they try to cover living expenses and secure funds. Worsening housing instability also played a role. Demand for jeonse (key money deposit) and monthly rent funds increased significantly, and rising housing prices added to the burden.

▲ Chairman Junggeun Oh: The employment rate for the 2030 generation is at rock bottom. Without stable income, it’s highly likely they resorted to borrowing to cope with living difficulties. They probably needed loans for jeonse deposits and monthly rent as well. The difficulty in asset accumulation is another factor. Older generations could grow assets through earned income. Young people without means to build assets likely turned to stocks and cryptocurrencies.

When Interest Rates Rise, Partial Repayment and a Safety-Oriented Approach Are Necessary

- If interest rate hikes materialize, those under 30 are expected to be more vulnerable. What are the solutions?

▲ Professor Daejong Kim: Borrowers under 30 should repay a portion of their debt within their capacity and necessity. The desire to grow assets through investment is not inherently bad. However, even in this case, they should be cautious about entering risky markets like cryptocurrencies for the time being. Even when investing, they should adopt a sound and safety-oriented approach.

▲ Professor Sangbong Kim: In fact, there is no problem if interest is paid. The problem arises when repayment is not possible and debt levels are large. Especially in the case of housing, if one cannot hold on, they must sell. The more people in this situation, the more houses must be sold cheaply. This inevitably leads to a strong shock in the real estate market.

▲ Professor Sung: The most fundamental solution is job creation. To achieve this, labor market reforms should establish flexible employment relationships with performance-linked compensation systems. Stabilizing the real estate market by ensuring housing supply in areas with demand is also important. For low-income, high-risk groups, financial loans should not be the approach; instead, fiscal support is necessary.

▲ Chairman Oh: Young people with stable income are fine. The problem lies with multiple debt holders. The craze for ‘Yeongkkeul’ (borrowing to the limit) is characterized by an increase in multiple debtors. Multiple debtors are vulnerable to interest rate hikes. Young people with unstable income borrowing money should recognize the real danger. There are various ways to reduce debt size during interest rate hikes. If borrowing is unavoidable, switching from variable to fixed interest rates is advisable.

With Presidential and Local Elections Approaching, Do Not Fully Trust Political Pledges

- What should be noted about political pledges on household debt, such as Gyeonggi Province Governor Lee Jae-myung’s ‘easy loan’ pledge?

▲ Professor Daejong Kim: Providing easy loans to young people is a contradictory policy even within the government. The government and financial authorities’ stance is to lower or control housing prices and limit the spread of debt. I hope young people do not fully trust such policies. Even if implemented, loan conditions may improve, but it does not necessarily lead to good outcomes. Loan decisions should be made carefully and personally.

▲ Professor Sangbong Kim: The pledge to lend money easily on favorable terms to those under 30 may sound good, but it is not. Real estate is an asset that could decline in value. Taking out loans to buy a house that then falls in price is pointless. I do not see it as a desirable policy for those under 30. It would be better if they think about investing according to their earned income.

▲ Professor Sung: Easy loans can cause financial institutions to face bad debts and induce moral hazard among borrowers. To address this, realistic verification of funding sources for such pledges is necessary. Emphasizing autonomy and responsibility in private financial contracts is essential.

▲ Chairman Oh: The political sphere does not try to solve fundamental problems but only offers populist policies. These are not good measures for young people. Easy loans may seem like favorable loans for youth, but it is no different from giving cash through taxes.

2030 Generation Should Overcome Impatience and Prioritize Safety in Investments

- What advice do you have for the 2030 generation who are impatient about asset growth through coins, stocks, etc.?

▲ Professor Daejong Kim: If loans are truly necessary, they should be taken within a range that can cover interest payments. If you want to generate returns, pursue safe investments such as blue-chip stocks or public offering subscriptions.

▲ Professor Sangbong Kim: While individual young people may have made unwise choices, ultimately it is the government’s fault. It is not the 2030 generation but all generations that inflated housing prices. Since prices must not fall, the young generation ended up propping up these real estate prices.

▲ Professor Sung: It is important to understand that low-risk, high-return investments basically do not exist. It is also true that much responsibility for job and housing difficulties lies with the government and older generations, and this must be corrected. Young people should focus on steadily building their human capital and preparing for the future rather than pursuing risky investments solely for high returns.

▲ Chairman Oh: From the youth perspective, they made a natural yet desperate choice. There are no jobs, it is difficult to accumulate assets, and housing is even harder to obtain. This desperate choice could push young people into a pit of despair during interest rate hikes. I hope they fear debt. They must realize that debt can be a lifelong shackle. Even if urgent funds are needed, avoid private loan sharks as much as possible. If necessary, use policy loans or small loans for living expenses, and be aware that once you get involved with high-interest loans, it is difficult to escape.

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