Bank of Korea's Warning: Rising Housing Prices and Economic Dilemma

The Bank of Korea warns that rising housing prices threaten economic stability, urging careful management of household debt and interest rates.

### The Bank of Korea's Warning on Housing Prices
The Bank of Korea is struggling to control rising housing prices, with the current governor, Lee Chang-yong, taking a different approach by **engaging with the Ministry of Economy and Finance**. The governor's unusual focus on **policies and politics**, along with concerns about the country's future, has led to discussions on the **need for structural changes** to address the housing crisis. The rising household debt, driven by **mortgage loans and jeonse payments**, is exacerbating the problem, creating a **vicious cycle of increasing housing prices and decreasing disposable income for consumption**.

### The Shift in Korean Investment and Real Estate Recovery
Many individuals with less money are struggling to buy homes, leading to **increased investments in foreign securities**. The local market is experiencing a **decrease in money flow and trading volume**, resulting in **poor stock performance** and a **vicious cycle of foreign withdrawal**. Meanwhile, the real estate market, particularly in Seoul, is showing a **rapid recovery and rising prices**, causing a shift in buying sentiment towards the **metropolitan area**.

### The Impact of Fluctuating House Prices on the Financial Sector
The first financial sector was conservative, focusing on **safe senior positions**, but as house prices fluctuated and construction costs rose, initial investors began to feel the pressure, leading to **payment delays**. The outstanding balance of mortgage loans has exceeded a **60% loan-to-value ratio**, resulting in **rising delinquency rates** and a tough situation for small business owners. The Bank of Korea is questioning the appropriateness of lowering interest rates, as it could lead to a **surge in housing prices**, with some areas in Seoul already experiencing **significant increases**.

### Rising Housing Prices and Economic Challenges in Seoul
Housing prices in Seoul are expected to rise by **0.83%** after a drop, with higher-tier apartments potentially increasing by **2-3%** more. The national average housing price is also on the rise, leading to concerns about a potential **increase in apartment prices**. The strong demand for housing, driven by **lower interest rates**, has resulted in a significant transaction volume for Seoul apartments, but there are also challenges for financial institutions and marginal companies, raising the need for **rate cuts to provide relief**.

### The Sluggish Economy and Housing Price Dilemma
The economy is in a **sluggish state**, creating a vicious cycle that raises concerns about **managing the situation**. Lowering interest rates could impact rising housing prices, particularly in Seoul, but **macroeconomic stability policies** are also needed. The government is under pressure to **revive domestic demand**, and there is speculation about a potential **interest rate reduction** by the end of November.

### The Complexities of Korea's Housing Market
The Bank of Korea is struggling with the decision to **lower interest rates**, fearing it could lead to a **rise in housing prices**. Loan regulations are typically enforced during significant price increases, creating a state of **confusion in the market**. The current upward trend in housing prices, combined with strong regulations, has led to a **pause in transactions** and **uncertainty for both buyers and sellers**.

### Housing Market Dilemma: The Bank of Korea's Challenges and Economic Implications
* 🏦 The Bank of Korea has issued a warning regarding its **inability to control rising housing prices**, a concern highlighted by Governor Lee Chang-yong's recent visit to the Ministry of Economy and Finance, marking a **shift in approach**.
* 💬 "While the government aims to stimulate the economy, the Bank of Korea must exercise caution to avoid **excessive growth measures** that could **exacerbate the housing crisis**."
* 🏘 High housing prices in Korea are identified as a structural issue, leading to **increased household debt**, which has **surged to around 30 trillion won**, primarily due to mortgage loans and jeonse payments.
* 📉 The KOSPI index has struggled, remaining stagnant around **2,500 points**, causing investors to divert funds into real estate instead of stocks, creating a vicious cycle of **rising property prices and decreasing disposable income**.
* 📊 Recent data indicates that housing prices in Seoul have **risen almost 6 to 7%**, causing polarization as prices in provincial areas **decline**, while rental markets are also experiencing **upward trends**.
* 💔 The government's priority is to **revive domestic demand** amid economic struggles, as small business owners face **severe challenges**, leading to discussions about the potential **lowering of interest rates** to alleviate financial burdens.
* 📈 However, concerns persist that lowering interest rates could **further inflate housing prices**, particularly in metropolitan areas, creating a dilemma for policymakers who must **balance economic recovery with housing market stability**.
* 🔄 As the Bank of Korea navigates these complexities, the ongoing speculation about interest rate adjustments reflects the **urgent need for effective policy coordination** to address both **housing affordability** and **economic resilience**.

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