SEOUL Feb 3 South Korean house prices rose for
a fifth straight month in January, as consumers' growing
confidence in Asia's fourth largest economy nourished a recovery
from the longest sequence of price declines on record.
The property market is still below levels seen six years ago
when the market slumped after the 2008-2009 global financial
crisis, according to real estate agents.
But data released on Monday by Kookmin Bank, the
country's top mortgage lender, showed house prices rose 0.11
percent in January from December as a combination of low prices
and cheap borrowing has begun to draw buyers back.
On a yearly basis, prices rose 0.54 percent last month and
at the fastest pace since October 2012.
"The fact that housing prices hit bottom and that interest
rates on mortgages are cheap right now are extra incentives to
buy," said Lee Hyeon-woo, a 30-year-old office worker hunting
for a home with his fiancée.
While property prices elsewhere in Asia boomed, South Korean
prices had fallen or stayed flat in each of the 15 months
through August, despite three interest rate cuts during that
The Bank of Korea's policy rate is currently at
2.50 percent, its lowest since January 2011.
Kookmin's data showed that house prices rose just 2.3
percent annually between 2008 to 2013, after rising by an annual
average of 6.5 percent between 2002 and 2008.
According to Real Estate 114, a leading online real estate
portal, property prices in late January in Seoul and its
surrounding metropolitan area were nearly 11 percent lower than
they were at the end of 2007.
"Last year, the market reached a trough," said the portal's
head analyst Ham Young-jin. "Unless we see another global crisis
the market should make a soft landing."
Ham said prices are expected to increase steadily this year
in the capital and its greater metropolis, where a fifth of the
country resides. Prices in the rest of the country should
follow, albeit at a slower pace.
President Park Geun-hye's government has provided tax cuts
and lower interest rates for people wanting to rent or buy
property in a bid to jump-start the economy, and reduce reliance
Park has also taken steps to loosen regulations that were
introduced back when the real estate market was overheating.
The Bank of Korea expects the economy to expand by 3.8
percent this year as domestic consumption improves, with growth
accelerating from 2.8 percent last year and 2.0 percent in 2012.
A pickup in wages and economic growth will help reduce South
Korea's high household debt, most of which is related to real
estate. In 2012, household debt stood at 153.4 percent of
disposable income on a gross basis, well above an Organisation
for Economic Co-operation and Development (OECD) average of
"Household debt has shown signs of stabilising after rising
over the past decade," said HSBC economist Ronald Man in a
research note. "Wage and housing price growth will likely be
sustained, supporting private consumption," said HSBC economist
Ronald Man in a research note.
(Editing by Simon Cameron-Moore)