This file photo taken on Oct. 24, 2021, shows people at a shopping mall in Seoul. (Yonhap)
SEOUL, Dec. 21 (Korea Bizwire) — In contrast to the public perception that a hike in asset prices would likely to lead to an increase in consumption, household consumption actually declined despite the recent surge in housing prices in Seoul, a study showed Monday.
A 1 percent hike in apartment prices led to a decline of 0.104 to 0.118 percent in household consumption, according to the report released by the Seoul Institute, affiliated with the Seoul Metropolitan Government.
The study was based on the analysis of the impact that the change in apartment prices and income levels for the 2010 to 2018 period has had on household consumption in the city’s 25 districts.
The report suggested that individuals without their own homes increase savings and reduce consumption to purchase homes in the future.
For Seoul, the home possession rate was low at only 48.6 percent in 2020, indicating that there are many people who reduce consumption to purchase homes when apartment prices surge.
Even those who possess their own home remain reluctant to increase consumption even when apartment prices surge. This is primarily because there are many cases in which households have purchased homes with loans and still have a debt burden.
Even the households with lower loan burdens cannot easily feel the hike in the value of their assets unless they sell their apartment, thereby leaving them reluctant to increase consumption.
J. S. Shin (js_shin@koreabizwire.com)
