Housing Price Outlook CSI Under 40 at 129
Just 1 Point Away from the All-Time High in September 2018
[Asia Economy Reporter Kim Eunbyeol] People who expect house prices to rise one year from now appeared regardless of age, gender, or occupation. In particular, many young office workers under the age of 40 predicted an increase in housing prices. This reflects the reason behind the recent 'panic buying' among the 30s and 40s generation. The psychology at play is that house prices are expected to continue rising, and with stricter loan regulations, it will become even more difficult to own a home in the future.
According to the 'July 2020 Consumer Sentiment Survey' released by the Bank of Korea on the 29th, the Housing Price Expectation Consumer Sentiment Index (CSI) for those under 40 was 129, the highest among all age groups. This is just one point shy of the all-time high of 130 recorded in September 2018. After dropping to 100 in April when the COVID-19 pandemic worsened, it rose by 29 points in just three months. The Housing Price Expectation CSI for the 40-50 age group also increased by 10 points this month, although the rise was smaller than last month's 17 points. The Housing Price Expectation CSI for those aged 70 and above was also high at 127.
Looking at responses by income, many people earning between 1 million and 2 million KRW per month expected housing prices to rise. The Housing Price Expectation CSI for the 1 million to 2 million KRW monthly income group reached a record high of 132. This explains the frustration expressed as 'owning a home is just a dream' because income is insufficient while house prices are expected to increase further.
Coincidentally, the Housing Price Expectation CSI surged each time the government announced major real estate measures. The previous record highs were around the announcement of the September 13, 2018 measures. However, unlike then, this time the sentiment has not stabilized even after the measures were announced. In September 2018, the CSI dropped by 14 points the month after the measures were announced and showed a downward trend for six consecutive months. After the December 16, 2019 measures, the CSI declined for two months but was heavily influenced by the COVID-19 pandemic and soon rose again.
Looking at the Consumer Sentiment Survey overall, the Consumer Confidence Index (CCSI) rose for the third consecutive month to 84.2, with the Current Economic Conditions CSI (+5 points, 49), Current Living Conditions CSI (+1 point, 85), Household Income Expectations CSI (+2 points, 90), and Consumption Expenditure Expectations CSI (+2 points, 95) all increasing simultaneously. However, among consumption expenditure expectations, the Housing Cost Expenditure Expectations CSI rose by 3 points to 104. This reflects the expectation that spending on housing costs will increase as both housing prices and rent prices have surged.
The COVID-19 pandemic has widened the perception gap between self-employed individuals and salaried workers regarding current living conditions. The Current Living Conditions CSI for salaried workers in July was 90, while for self-employed individuals it was 75, a gap of 15 points. This is about twice the average gap of 8 points last year. The Household Debt Expectations CSI for self-employed individuals was also higher at 105 compared to 99 for salaried workers, and consequently, household savings were 13 points lower for the self-employed (96) than for salaried workers.
Meanwhile, according to the Bank of Korea survey, the public's perceived inflation rate over the past year, representing the consumer price perception, remained at 1.7%, the same as the previous month. The expected inflation rate, which corresponds to the forecasted consumer price increase over the next year, rose by 0.1 percentage points to 1.7%. Among the main items expected to influence consumer prices over the next year, 41.5% cited rent. This was followed by public utility charges (33.7%) and agricultural, livestock, and fishery products (32.0%).
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