[Financial Stability Report] Kim Jonghwa, Monetary Policy Committee Member, Warns of Possible Renewed Risks in Housing Market and Household Lending

Warnings Issued Over Rising Housing Prices in the Seoul Metropolitan Area
Jonghwa Kim Emphasizes Need for Continued Policy Coordination and Structural Reform

There have been warnings that as expectations for rising housing prices increase in certain areas of the Seoul metropolitan area, there is a need to remain vigilant about the possibility of expanding risks related to the housing market and household lending.

Jonghwa Kim, Monetary Policy Committee Member of the Bank of Korea.

Jonghwa Kim, Monetary Policy Committee Member of the Bank of Korea, made this statement on June 25 while releasing the Financial Stability Report.

Kim stated, "Under the current trend of interest rate cuts, the expansion of rising housing prices in some regions could lead to a sharp increase in household loans and overheating in the real estate market, which may further exacerbate financial imbalances. Therefore, it is necessary to continue policy coordination with relevant government ministries." He emphasized, "In the mid- to long-term, efforts must be made to structurally reform by stabilizing household debt leverage and alleviating the concentration of credit in the real estate sector."

He also pointed out, "Due to high domestic and external uncertainties and an economic slowdown, there has been an increase in insolvencies among vulnerable sectors such as the self-employed and small and medium-sized enterprises. As a result, there are concerns about a decline in the soundness of financial institutions, particularly among regional and non-bank entities."

Kim further stated, "For potential risks in vulnerable sectors, such as the accumulation of insolvency among the self-employed and marginal firms, as well as issues related to real estate project financing (PF), it is necessary to seek differentiated policy responses for each sector, while consistently pursuing orderly restructuring. In the mid- to long-term, efforts should also continue to improve income conditions and strengthen the domestic demand base."

Regarding housing policy finance, he added, "Given its increasing impact on financial stability, it is desirable to supplement the system's operational methods to better harmonize policy objectives, such as improving housing welfare and ensuring financial stability."