"Most Loans Flow into Real Estate... Principle of Restricting Speculative Demand Must Be Maintained"

[Asia Economy Reporter Park Sun-mi] When managing the household debt growth rate, it was suggested that the policy implementation methods and targets should be refined under the principle of loans within the repayment capacity and restricting speculative loan demand.

Park Chun-sung, a research fellow at the Korea Institute of Finance, stated in the report titled "Macroeconomic Impact of Managing Household Debt Growth Rate and Future Tasks" on the 30th, "Household debt in South Korea has increased very rapidly over the past 10 years, and considering the economic situation and housing price increases during that period, it is highly likely that most of it has flowed into the housing market."

He added, "The impact of managing the total amount of household debt must consider the ripple effects through the housing market," explaining, "It can cause an increase in tenants' housing costs due to the conversion from jeonse to monthly rent, and a slowdown in related durable goods and construction industries due to contraction in the housing market."

Accordingly, Park believes that the level and method of managing household debt need to be flexibly adjusted according to the economic situation. He added, "If the supply of new apartments surges, household debt may also increase significantly due to group loans, and in this case, rigid management of the household debt growth rate could act against housing supply that helps stabilize the housing market in the long term."

Park emphasized, "When managing the household debt growth rate, the policy implementation methods and targets should be refined under the principle of loans within the repayment capacity and restricting speculative loan demand," and stressed, "Practically, it is important to implement consistent policies to slow the growth of household debt relative to income in the long term to reduce potential risks and to stabilize the housing market through steady housing supply."