Housing Price Expectations Rebound; Government Urged to Act Swiftly

South Korea is witnessing a resurgence in housing price expectations, particularly in the Seoul metropolitan area, reaching levels not seen since the sharp increases of late 2020 and early 2021. The Bank of Korea's June consumer survey revealed a significant jump in the housing price outlook index to 120, a stark contrast to the 96-108 range observed from February to April. This index indicates that more consumers anticipate price rises than falls within the next year.

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Given that people's psychology is the key variable that determines prices in the housing market, this is by no means a signal to be taken lightly.

Analysts point to the substantial liquidity flowing from the booming semiconductor industry as a primary driver. Generous bonuses, sometimes reaching hundreds of millions of won per employee at major semiconductor firms, are reportedly entering the real estate market. Given the sustained demand for artificial intelligence, the semiconductor boom is expected to continue for at least another year or two, making it difficult to dismiss this influx of capital as a temporary phenomenon.

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The government must quickly prepare comprehensive measures covering supply, taxation, and loans to calm market anxieties.

The government is urged to act swiftly, as a sustained rise in housing price expectations could trigger a chain reaction in the market. Homeowners might withhold properties from sale, anticipating further gains, while those without homes could be pushed into 'panic buying.' President Lee Jae-myung has announced plans for a comprehensive real estate policy next month, emphasizing the need for bold and effective measures to calm market anxieties.

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The semiconductor boom, with its overflowing liquidity, is a major factor in the recent rise in housing prices.

Corporate behavior also plays a crucial role. Companies are advised to refrain from actions that could exacerbate housing price increases in the capital region. Samsung Electronics' recent agreement to provide employees with bonuses and low-interest internal loans of up to 500 million won at 1.5% interest has drawn criticism. While framed as employee welfare, the scale and terms are considered excessive, raising concerns about fairness compared to general citizens facing higher market interest rates and potentially undermining government loan regulations. The observed price hikes in areas near semiconductor companies lend credence to these concerns, prompting calls for financial authorities to issue guidelines on internal corporate lending.

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It is difficult to dismiss this as a temporary phenomenon, considering the possibility of the semiconductor boom continuing for years.