[The Editors' Verdict] Will Birth Rates Rise If Housing Prices Fall?

"Housing prices are gradually stabilizing."

Recently, a senior official from the Ministry of Land, Infrastructure and Transport evaluated the real estate market. The soaring rise in Seoul housing prices has slowed, and transactions have decreased. As he hoped, housing prices may be entering a downward stabilization phase. Whether the sharply rising housing prices this year have truly entered a calming phase is a key point to watch. Especially in addressing low birth rates, stabilizing housing prices is a top priority.

It is known that when housing prices rise, birth rates fall. Stable housing is necessary for marriage. If housing prices rise too much, people tend to postpone marriage. According to current social norms in Korea, it is still rare to have children without marriage. Therefore, if housing prices continue to rise like this year, birth rates are likely to decline further.

A study (Korea Research Institute for Human Settlements, 2023) shows that if housing prices rise by 1%, the birth rate decreases by 0.014 children over seven years. Some companies this year have introduced incentives such as providing 100 million won or apartments to families with children, which can be seen as targeting this aspect.

If housing prices and birth rates have this kind of relationship, entering a calming phase in housing prices is something to celebrate. With reduced economic burdens related to housing, more households should get married, and more people should have children.

However, in reality, this correlation does not seem to appear. In terms of economic burden related to housing, housing prices have already risen to the point where people have to do "Yeongkkeul" (borrowing to the limit). Regardless of the level of housing prices, buying a house when prices are expected to fall is not rational. Jeonse prices have been rising for 72 consecutive weeks until last week, making it still difficult to secure a stable living environment.

For families who have already done "Yeongkkeul," a drop in housing prices could be a significant blow. Given that 60% of household assets in Korea are concentrated in real estate, a decline in housing prices drags down the economy. If a drop in housing prices leads to an increase in birth rates, wouldn't a single national low birth rate countermeasure of "smooth housing supply" be sufficient? Hyejung Yoo, Research Center Director at the Korea Future Population Research Institute, advises, "Some young people who own homes fear a drop in housing prices," and cautions, "It should be kept in mind that a drop in housing prices does not necessarily lead to an increase in birth rates."

However, a decline in housing prices could be a good opportunity to shift the focus of low birth rate countermeasures from housing prices to other areas. If efforts are made to develop childcare service markets, introduce and expand family-friendly policies, weaken social norms regarding gender roles, and increase labor market flexibility, it will provide an opportunity to address the low birth rate issue from various perspectives. A paper released on the 1st by the Bank of Korea Economic Research Institute titled "Analysis of Causes and Policy Effects of Ultra-Low Fertility (Focusing on OECD Country Analysis)" states that "recently, a positive correlation between female labor participation rates and birth rates has appeared in high-income countries," indicating that such socio-cultural factors have had an impact.

Before housing prices enter a calming phase, perhaps this is what the government should prepare for. Along with stabilizing housing prices, if a labor environment that supports both work and family is established, the formula "when housing prices fall, birth rates rise" will eventually hold true.