The Unassuming Economist

From the IMF’s latest report on Korea:

“The financial sector is sound, with high and rising household debt the main domestic financial stability risk. Household debt exceeds 90 percent of GDP, increasing vulnerability to both a housing price correction and a sharp rise in interest rates. A tightening of macroprudential measures has helped slow household credit growth to 7.8 percent year-on-year in October, from the 12-percent average annual growth rate in 2016. The increase in house prices nationally has slowed to about 1 percent year-over-year; but in Seoul apartment prices are still rising at a nearly 5-percent annual rate. Macroprudential policy measures, including some targeting speculative buying of apartments in Seoul, should help stabilize prices. According to staff analysis, the overall housing prices level is in line with fundamentals. However, there remains a risk of a price correction in the region around Seoul, which experienced larger price increase and where the surge in supply from the construction boom could weigh on prices.”