With rising bank interest rates, South Koreans can only wait to buy dream homes in Seoul

South Koreans can’t wait to buy their dream homes in Seoul because bank interest rates are going up. SEOUL: Due to the steeply rising interest rates charged by banks, some South Koreans are putting off taking out loans and are waiting for the right time to purchase their ideal Seoul residence.

Despite the fact that home prices are beginning to fall, they are still taking a wait-and-see approach.

For instance, South Koreans looking to purchase a home in the capital were once anticipating that the Olympic Park Foreon residential project would be highly sought after. More than 10,000 homes will be accommodated in the development.

However, as bank interest rates rise, it is becoming difficult to convince. Additionally, some buyers have acknowledged that it was not an easy choice.

One resident stated, “Of course it’s difficult when interest rates are high.” Additionally, I was concerned about coming here to sign this contract. However, since the location is favorable, I have decided to sign the contract.

RAISING INTEREST RATES Since August of last year, the Bank of Korea has increased interest rates to 3.5%, the highest level since 2008.

The five major banks in South Korea also saw their average mortgage rates fluctuate between 5.47 percent and 8.11 percent.

Since the global financial crisis of 2008, the rate’s upper limit has never been higher than 8%.

As a result of concerns that any additional hikes could stifle economic growth by slowing consumption and corporate investment, there are now some expectations that the central bank will stop the hikes in the upcoming months.

Observers said that the move would also make it easier for people who took out loans to buy homes or survive the COVID-19 pandemic.

Rhee Chang-yong, governor of the Bank of Korea, stated that banks were well capitalized, so he did not believe that household debt would cause instability in the near future.

However, he expressed concern regarding the relatively higher proportion of floating-rate loans and short-term debt in South Korea.

Mr. Rhee stated, “As a result, consumer spending and economic activity can be more sensitive to any decrease in housing prices and monetary tightening.”

“Macroeconomic policy will be much more difficult as a result of the cumulative effect of interest rate increases, which could result in an aggravating trade-off between inflation and growth.”

Borrowing has slowed down as a result of high interest rates, and unlike in the past, people are reluctant to take out loans to purchase homes.

Only 578 apartments were purchased and sold in Seoul last month, a 50% decrease from the previous year.

According to Dr. Yang Jun-sok, an economics professor at the Catholic University of Korea, “the richer part of the households, they will probably not want to get any more housing at the current time, because the price of housing is dropping so quickly.”

Therefore, they probably won’t have the motivation to borrow more money to repay housing unless they are convinced that housing prices have reached their bottom. Therefore, household debt is likely to remain stable or decrease slightly, at least for the time being.

As he lifted many of the previous administration’s restrictions on the housing market, South Korean President Yoon Suk-yeol lowered taxes and allowed people to borrow more.

In addition, apartment owners no longer have to live in their property for eight years before they can sell it.

Experts believe that housing prices will continue to fall for at least a little while longer, despite the fact that it is too early to predict how these measures will affect the economy.

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