BOK: “Rising Corporate Profits and Nominal Wages Will Boost Demand for Home Purchases”

[Financial News]  The Bank of Korea said on the 10th that “improved corporate profits and rising nominal wages will increase household purchasing power and boost demand for home purchases.”
In its Monetary and Credit Policy Report released that day, the BOK offered this outlook, saying, “Given the housing supply shortage and rising household income, uncertainty in the housing market and household lending is high in the short term.”
During the first half of the year, housing prices surged, particularly across the “semiconductor belt,” including Dongtan, Hwaseong, as performance-based payments from semiconductor companies such as Samsung Electronics and SK hynix coincided with expectations of expanded in-house lending.
Household lending is also on the rise. Despite the government’s stringent lending regulations and financial-sector controls on total lending, household loans have continued to grow as housing transactions increase.
According to the BOK, mortgage loans increased by 4 trillion won last month, bringing household loans close to a record 1,200 trillion won. The BOK assessed that “the risk of financial imbalances is intensifying as housing prices in the Seoul metropolitan area continue to rise sharply and household lending also remains on an upward trend.”
Seoul’s outer areas and regulated districts in Gyeonggi Province are seeing steep price increases as actual homebuyers shift from renting to purchasing amid a shortage of apartments in the Seoul metropolitan area and instability in the jeonse and monthly-rental markets.
The BOK forecast that “the financial sector’s overall stance of tightening household-loan management will continue for the time being,” but added, “Depending on future housing-market conditions, households’ borrowing capacity could become a factor driving loan growth.”
The BOK assessed that “because the impact on loan demand differs among households even amid a policy stance of raising the benchmark interest rate, related trends must be closely monitored,” adding, “It is necessary to maintain a consistent policy stance so as not to stimulate expectations for the housing market or accelerate household-loan growth.”
[email protected] Jeong Sang-gyun Reporter