On the 14th, a briefing session on the monetary and credit policy report is being held at the Bank of Korea in Jung-gu, Seoul. From the left, Lee Ju-yong, head of the Bank of Korea’s Trend Analysis Team, Bang Hong-ki, head of the Policy Planning Department, Assistant Vice Governor Lee Sang-hyung, Monetary Policy Director Hong Gyeong-sik, and Policy Cooperation Team Head Kim Byeong-guk. yunhap news
The Bank of Korea voiced strong concerns about the recent trend of rising expectations of rising housing prices and increasing household debt. This is because, considering various basic economic conditions such as income, the additional increase in household debt increases the potential risk of an economic and financial crisis while housing prices in Korea are still high. In addition to strengthening lending regulations, the need for measures to expand housing supply was also mentioned. In the monetary and credit policy report submitted to the National Assembly on the 14th, the Bank of Korea said, “The accumulation of financial imbalances in Korea has centered on real estate, resulting in various side effects such as reduced efficiency in resource allocation and economic vulnerability to the real estate market.” “In particular, household debt “Unlike in major countries, it has continued to increase without deleveraging, reaching a level that undermines macroeconomic and financial stability,” he said. Financial imbalance refers to a phenomenon in which financial resources are concentrated on investment in assets such as real estate due to excessive debt, which can cause an asset bubble and have a negative impact on the financial system and the overall macroeconomy. The report said, “Monetary policy was maintained in a tight manner with a focus on price stability, but macroprudential policy was eased significantly due to financial market instability and concerns about a hard landing in the housing market at the end of last year,” adding, “The possibility of a hard landing in the housing market has decreased since the beginning of this year, but recently “The scale of increase in household loans is larger than expected, and the level of financial imbalance is showing signs of worsening again,” he diagnosed. Specific examples of ‘macroprudential policy easing’ mentioned by the Bank of Korea include expansion of policy finance such as special mortgage loans, relaxation of loan regulations, and expansion of exceptions to the application of the total debt service ratio (DSR). The Bank of Korea has pointed out that there is a problem with the government’s change in lending policy. In particular, the Bank of Korea judged that current housing prices were overvalued and was concerned about the resulting damage to growth potential. Lee Sang-hyeong, Deputy Governor of the Bank of Korea, said, “If you look at the conditions surrounding the current housing market, there is a mixture of both upward and downward factors,” adding, “However, it is clear that housing prices are overvalued compared to household income levels.” According to the Bank of Korea’s analysis, as of the first half of this year, the ratio of housing prices to household income in Korea was 26 times (median), which is significantly higher than the Organization for Economic Co-operation and Development (OECD) average (11.9 times). The ratio of household debt to Korea’s nominal gross domestic product (GDP) is 105% (as of the end of last year), which is higher than the appropriate level (80-100%). The Bank of Korea emphasized preemptive response through a close combination of monetary policy and macroprudential policy. The report evaluated that while macroprudential regulation-oriented responses can be microscopic and selective, policy effects may be limited. He pointed out that monetary policy-centered responses have a broad effect on credit and asset prices, but the negative impact on the real economy is likely to be significant. The idea is that since both policy measures have pros and cons, close cooperation and effective combination are necessary. The Bank of Korea also expressed concern that the two policy directions may diverge or have a negative synergistic effect. The report said, “To promote mid- to long-term stable growth, financial imbalances must be managed below a certain level,” and “Considering that real estate has served as a key mechanism in the accumulation of financial imbalances, related policies must be consistently implemented in the mid- to long-term time horizon.” emphasized. Hong Kyung-sik, head of the Bank of Korea’s monetary policy department, said, “Policy responses are needed to dampen expectations of rising housing prices so that they do not persist. Financial authorities have recently introduced measures to dampen such expectations on the demand side, but if the trend of increase in household debt continues, supply “From a perspective, we must also consider measures to dampen expectations of rising housing prices,” he said. The intention is that if the increase in household debt continues despite the government’s recent measures such as restricting the supply of special housing loans, a plan to expand housing supply should also be proposed. Senior Reporter Park Soon-bin [email protected]
2023-09-14 08:53:34
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