Consumers expecting home prices to rise fell by the largest margin in 3 years and 7 months. As the government's high-intensity real estate measures slowed the rise in Seoul apartment prices, it appears the overheated sentiment has cooled somewhat.
According to the "February consumer sentiment survey results" released by the Bank of Korea on the 23rd, this month's home price outlook index was 108, down 16 points (p) from the previous month. When this index exceeds 100, it means more consumers expect home prices to rise in a year than those who expect them to fall.
In January this year, the index hit a record high for the first time in 4 years and 3 months since October 2021 (125). Although the government rolled out the June 27 household debt measures, the Sept. 7 supply measures, and the Oct. 15 real estate measures last year in succession, expectations for rising home prices persisted. However, as the government made it clear it would end the grace period for heavier capital gains taxes on owners of multiple homes, prices fell mainly in Gangnam, and market sentiment also weakened.
Lee Heunghu, head of the economic sentiment survey team at the Bank of Korea (BOK) Economic Statistics Department 1, said, "It appears expectations for dwellings price increases have been dampened by the government's real estate measures," adding, "We need to see how long these expectations will affect actual supply and demand."
Overall consumer sentiment improved. The January consumer composite sentiment index (CCSI) was 112.1, up 1.3 p from December (110.8). With strong exports centered on semiconductors intersecting with a buoyant domestic stock market, more consumers viewed the economic outlook positively, the Bank of Korea (BOK) said.
The CCSI is an index calculated by combining six items: ▲ current living conditions ▲ outlook for living conditions ▲ outlook for household income ▲ outlook for consumption expenditure ▲ assessment of current economic conditions ▲ outlook for future economic conditions. A reading above 100 means consumer sentiment is optimistic compared with the long-term average (2003–2024), and below 100 means it is pessimistic.
Compared with January this year, among the six indices, assessment of current economic conditions (95) rose 5 p, outlook for future economic conditions (102) rose 4 p, and outlook for living conditions (101) rose 1 p. Current living conditions (96), outlook for household income (103), and outlook for consumption expenditure (111) were the same as the previous month.
Expected inflation, which shows the projected consumer price inflation rate over the next year (2.6%), was the same as the previous month. The expected inflation rates for prices three years from now and five years from now were also 2.5%, the same as the previous month.
The interest rate level outlook index (104), which forecasts the level of interest rates in six months, rose 1 p. As market interest rates increased and expectations for a base rate cut weakened, it climbed to the highest level in 2 years and 2 months since December 2023 (107).