SEOUL, Sept. 30 (Korea Bizwire) – South Korea’s soaring housing prices, like those in other Asian countries, can cause downside risks for the broader economy, a report by the Asian Development Bank (ADB) said Sunday.
In the updated version of the Asian Development Outlook, the international development financial institution warned that elevated housing prices threaten severe growth downturns if prices reverse abruptly. It said that escalating housing purchase prices in major Asian economies, notably in South Korea, Hong Kong, China, Malaysia and Taiwan, pose tough challenges.
The Manila-based institution said that the recent movement in property prices can be attributed to such factors as economic growth, eased credit policies by lenders, accommodative monetary stances and sharp inflows of capital.
It said South Korean houses were the least affordable for its people among the larger countries that were checked.
The findings pointed out that, among South Koreans, only those in the top 20 percent of the income bracket were not overstretched in terms of buying a modest 50 square meter home over a 20-year period. It said that for larger homes with a floor space of 70 square meters, all wage earning brackets were hard pressed to make payments.
The ADB measures “housing affordability” by whether the average monthly loan repayment exceeds 40 percent of average monthly household income.
It said that in many Asian countries, a home is a key asset that has implications for consumption and savings.
The development bank said that, because of the importance of the housing market, any serious problems can rock financial markets of countries as a whole. It said policymakers need to closely monitor home prices and strive to make it possible for more people to buy homes without sudden drops in the market value of real estate.