SEOUL: South Korea's property market has abruptly gone from sizzling hot to floundering, piling pressure on some of the world's most debt-saddled consumers as the sector experiences the fastest interest rate hikes on record.
With nearly three quarters of household wealth tied to real estate, policymakers worry higher mortgauge rates could increase defaults and take the economy closer to a financial crisis. Her family now pays 720,000 won more each month than last year for their 500 million won mortgage, which her broker said will probably rise further by year-end, bringing their total monthly repayment to almost 4 million won, or 70 per cent of her husband's pay.
"South Korea's financial system is one of the most vulnerable in the world to interest rate hikes, as the debt increase over the pandemic has been one of the highest," said Seo Young-soo, an analyst at Kiwoom Securities. Over the past five years, Seoul home prices more than doubled in what began as a stimulus-fuelled search for homes and turned into a national pastime, even as heavier loan restrictions threw many millennials into financial distress.