Weakened Housing Price Decline... Experts Urge "Preemptive Measures Against Household Debt Resurgence"

National Economic Advisory Council-Korean Economic Association Joint Forum

Recently, as the decline in real estate prices has slowed and household debt has started to increase again, experts have emphasized the need to strengthen debt management and real estate financial monitoring.

The National Economic Advisory Council and the Korean Economic Association jointly held a policy forum on the afternoon of the 23rd at the Korea Exchange Conference Hall in Yeouido, Seoul, under the theme "Current Status, Outlook, and Improvement Measures of the Real Estate Market."

The forum was attended by Lee In-ho, Vice Chairman of the National Economic Advisory Council, Hwang Yoon-jae, President of the Korean Economic Association, and members of the National Economic Advisory Council.

Professor Kim Kyung-min of Seoul National University’s Graduate School of Environmental Studies explained in his presentation that Seoul apartment prices peaked in October 2021, hit a low point in December last year, and as of April this year, have risen about 6.6% from the low point, indicating signs of a market rebound.

Professor Kim stated, "Since the implementation of the Special Home Loan Program in January this year, transactions of apartments priced below 900 million won have increased," adding, "While the increase in housing supply in the Gangnam area from 2023 to 2025 may exert downward pressure on jeonse (long-term lease) prices, the supply is expected to sharply decrease after 2026."

Shin Yong-sang, Director of the Financial Risk Research Center at the Korea Institute of Finance, said, "Household debt in our country is problematic in terms of size, speed, and quality," and explained, "With the recent widespread perception of interest rates peaking, sufficient deleveraging has not occurred, so preemptive measures are needed against a renewed surge in household debt."

He emphasized, "It is necessary to manage the scale and speed of debt, control the quality of debt by preventing balloon effects among financial sectors, and establish lending practices within borrowers’ repayment capacity."

Kim In-gu, Director of the Financial Stability Department at the Bank of Korea, also stated during the discussion, "Since household debt has been increasing in April and May this year, there are concerns about the accumulation of financial imbalances," adding, "Because the household debt-to-GDP ratio in our country is very high, more attention must be paid to household debt."

Professor Lee Chang-moo of Hanyang University explained that government policy support is necessary to resolve the recent reverse jeonse problem.

Professor Lee pointed out that excessive intervention in the jeonse and monthly rent market, such as the rent ceiling system, has created risks that increase housing instability for low-income tenant households, and emphasized the need for policy choices that accept the structural changes in the domestic rental market, where the share of jeonse is shrinking in the long term.

He said, "It is necessary to provide liquidity through a temporary and limited relaxation of the Debt Service Ratio (DSR) regulation as a preventive measure against the potential collapse of the jeonse market caused by credit crunch," and added, "The rent ceiling system also produces side effects that undermine housing stability for low-income households, so its abolition is necessary."

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