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Household debt growth accelerates in Q2

Finance 12:00 August 22, 2019

By Byun Duk-kun

SEOUL, Aug. 22 (Yonhap) -- The growth of overall debt owed by South Korean households greatly accelerated from three months earlier in the second quarter, central bank data showed Thursday, amid possible signs of a rise in demand for houses despite strong government efforts to curb real estate speculation.

In the three months ended June 30, household credit came to a new high of 1,556.1 trillion won (US$1.29 trillion), up 16.2 trillion won or 1.1 percent from three months earlier, according to the data from the Bank of Korea (BOK).

The reading marks a sharp increase from a 3.2 trillion won or 0.2 percent on-quarter gain in the January-March period.

The rise also comes despite a series of government measures aimed at curbing a sharp rise in home prices, which include strict lending regulations and heavy taxation on owners of multiple homes.

Recently, however, housing prices have been showing signs of a steep increase, especially in the capital area.

In the one-year period ended June 30, the average presale price of new apartments in Seoul jumped 21 percent from a year earlier, according to earlier reports.

Household credit refers to overall household debt, including household loans and credit card spending. Excessive household credit is considered a great downside risk, especially when the economy is slowing.

The South Korean economy is estimated to have expanded 1.9 percent on-year in the first six months of the year amid a steady decline in exports and sluggish investment.

The BOK slashed its annual growth outlook to 2.2 percent last month from 2.5 percent forecast three months earlier.

Household debt growth accelerates in Q2 - 1

From a year earlier, household credit added 63.7 trillion won or 4.3 percent, slowing from a 104.6 trillion won or 7.5 percent on-year increase posted in the same period last year.

Outstanding household loans, including mortgages, gained 15.4 trillion won to 1,467 trillion won, up 1.1 percent from three months earlier, also quickening from a 0.4 percent on-quarter increase in the January-March period.

"Compared with the previous quarter, home-backed loans and other loans from banks greatly increased," the BOK said in a press release.

The central bank partly attributed the increase to a "seasonal factor," where a rise in the number of relocations pushes up the demand for housing loans.

The bank noted the number of new apartment units sold in the second quarter jumped to some 93,000 from 53,000 three months earlier.

Credit card spending gained 800 billion won in the second quarter, marking a turnaround from a 1.9 trillion-won drop in the previous quarter.


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