A group of real estate experts downplayed the possibility of a Japan-like property bubble burst at a forum hosted by the Korea Chamber of Commerce and Industry on Tuesday.
Participants who shared the view that the nation’s property market is different from Japan included professor Choi Hee-gap from Ajou University.
Choi said that Japan suffered a property market crash ― “which was initiated by enterprises in the 1980s” ― in the wake of policymakers’ rapid hikes in interest rates in the 1990s.
“Unlike the Japanese case, Korea saw the expansion of the realty market on the back of active investment of households,” he argued.
“Further, thanks to financial authorities’ strict regulations on mortgage loans over the past several years, a bubble in housing prices is not so big.”
But he added that the government should implement detailed measures to cope with the aging society and resolve worries over a sharp drop in housing prices.
Kim Deok-ryeh, a researcher at Korea Housing Institute, said whether the sluggish real estate market will be revitalized depends on “the pending bill on easing regulations, the coming presidential elections and the eurozone fiscal crisis.”
Among the participants were officials from the Ministry of Land, Transportation and Maritime Affairs, Hyundai Research Institute, Citizens’ Coalition for Economic Justice and the Korea Housing Builders Association.
About 180 business leaders also participated in the KCCI forum as observers.
Meanwhile, Hyundai Research Institute recently warned that Korea may follow in the footsteps of Spain and Ireland as the country is now past its demographic window, the period when the percentage of people able to work reaches its peak.
“We must be mindful of the possibility of a property bubble burst as a sharp fall in the proportion of the working age population cuts demand for real estate,” an HRI analyst said in the report titled “Time to Prepare for Demographic Bonus 2.0.”
He said that Japan, the U.S., Spain and Ireland all faced real estate bubble bursts and financial crises amid plummeting asset demand as the working age population fell from its peak.
Korea has so far benefited from a demographic bonus with a growing working age population, or people aged between 15 and 64, offering more potential for high economic growth as smaller ratios of dependents to workers tend to boost savings and investment in human capital. But not anymore, the report said.
“Between 1966 and 2012, Korea enjoyed a demographic bonus, in which the rising share of the working age population and the decreasing costs of supporting dependents spurred economic growth,” it said.
By Kim Yon-se (firstname.lastname@example.org)