An analysis suggested that if dwellings prices stabilize, household spending and marriage and childbirth could increase.
On the 8th, Shinhan Financial Group Future Strategy Research Institute said in the report "What will change if home prices stabilize" that "in the current structure where real estate sits at the center of asset inequality, stabilizing real estate prices could ease intergenerational welfare gaps, restore spending capacity, and improve conditions for marriage and childbirth among young people."
The report said that with about 70% of Korean household asset concentrated in real estate, rising dwellings prices have led to a widening asset gap and higher housing costs, acting as a factor that constrains household spending.
According to the report, last year the top 20% by net worth held 65% of total net worth, while the bottom 40% held 4.8%. The report noted that rising real estate prices are acting as a factor that widens the asset gap across classes.
Korea's price to income ratio (PIR) for housing stood at 24.1 times, overwhelmingly higher than in major advanced economies. A PIR of 24.1 times means a median-income household would need more than 24 years to afford a home even if it saved all its income.
The report analyzed that this housing cost burden is feeding into a structure that directly limits household spending capacity. It argued that if home prices stabilize and the housing cost burden falls, the rebound in spending would likely be greatest among young and middle-aged groups. It also expected that stabilizing housing costs would lower the barriers to marriage and childbirth for young people, and increase investments that had been put off because of housing costs, such as education, self-improvement, and job changes.
On the childbirth front as well, rising dwellings prices appear to be one of the factors behind declining birthrates. The report also introduced research findings showing a tendency for the birthrate to fall the following year when dwellings prices rise 1%.
The report said, "On the financial demand side, among young people and newlyweds who gain surplus funds as housing costs fall, demand will expand for early-stage asset-building products such as seed-money savings accounts, Youth ISAs (individual savings accounts), and installment funds," adding, "Easing the housing cost burden could bring positive changes across all aspects of household life, including a recovery in consumption and improved conditions for marriage and childbirth."