Last Year's Housing Market Capitalization Surpasses 6000 Trillion Won... Record High at 3.2 Times GDP

Office of Assemblyman Goyongjin 'Status of Housing Market Capitalization Relative to GDP Since 2010' Data

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Kwon Haeyoung] Last year, South Korea's housing prices surpassed three times its gross domestic product (GDP).

On the 22nd, according to data titled 'Status of Housing Market Capitalization Relative to GDP Since 2010' submitted by the Bank of Korea to Go Yongjin, a member of the National Assembly's Planning and Finance Committee from the Democratic Party of Korea (Seoul Nowon Gap), the ratio of housing market capitalization to nominal GDP was recorded at 3.2 times. This is an increase from 3.0 times a year earlier.

The housing market capitalization last year was 6,534 trillion won (residential buildings 2,065 trillion won, associated land 4,469 trillion won), an increase of 14.1% (809 trillion won) compared to the previous year. Nominal GDP was 2,072 trillion won, rising 6.8% during the same period, indicating that housing market capitalization increased more than twice as much.

South Korea's housing market capitalization rose 6.2 times over about 20 years from 1,031 trillion won in 2000. This corresponds to an average annual increase of approximately 9.1%. During the same period, nominal GDP increased 3.2 times from 652 trillion won to 2,072 trillion won, an average annual rise of 5.5%. This means that real estate prices increased more than income.

The price-to-income ratio (PIR) for housing was 7.6 times at the end of last year, significantly exceeding the long-term average of 5.3 times. Seoul's PIR was 19 times, more than 72% higher than the long-term average of 11 times. The Housing Affordability Index (HAI) also reached a historic high of 84.6 in the first quarter of this year since the index was first calculated in 2004.

Last year, the average housing price in South Korea was 347.35 million won, a 12.6% increase compared to the previous year.

Assemblyman Go Yongjin stated, "South Korea's housing market capitalization relative to GDP is at a very high level, indicating a severe housing price bubble." He added, "Recently, with the recognition of housing price peaks and interest rate hikes, the real estate market is gradually stabilizing downward," emphasizing, "Stabilizing the real estate market is a very important task for the housing stability of ordinary citizens and macroprudential soundness."