South Korean President Lee Jae Myung delivers a speech throughout the opening ceremony of the forty eighth session of the UNESCO World Heritage Committee at BEXCO conference and exhibition centre in Busan on July 19, 2026. (Photograph by JUNG YEON-JE / POOL / AFP by way of Getty Pictures)
Jung Yeon-je | Afp | Getty Pictures
South Korean President Lee Jae Myung invoked Japan’s epochal property crash within the early Nineties, stoking considerations about Seoul’s actual property market as he prepares to revise taxes aimed toward stabilizing the housing sector.
Lee stated “fairly a couple of individuals” had been involved the nation may face Japan’s “misplaced” 20 or 30 years, in keeping with a CNBC translation. Lee was referring to Japan’s “misplaced a long time,” when development slowed following an actual asset and inventory market crash.
He identified in a public dialogue on actual property coverage Thursday that Tokyo’s housing market had “burst like a balloon” within the early Nineties, as he sought to spotlight South Korea’s overheating actual property market.
Actual property accounts for the most important share of South Korean family wealth, Lee added, saying knowledge reveals that South Korea is among the many nations with the very best proportion of family wealth concentrated in actual property globally.
As of end-March 2025, actual property accounted for 75.8% of Korean family property, in contrast with 24.2% for monetary property.
The South Korean president has a historical past of constructing daring calls.
Forward of the 2025 presidential election, when the benchmark Kospi index was close to 2,500, Lee, then a candidate, reportedly set a goal of 5,000 for the Kospi throughout his time period by pledging to resolve the so-called “Korea low cost.”
The Kospi briefly crossed 5,000 in January 2026, simply over six months after he took workplace, driving the AI-powered chip growth.
Lee’s authorities has tried to steer family wealth away from an overheated housing sector and into monetary markets, a technique which has solely partially labored.
The South Korean benchmark now hovers at round 6,700, having skilled unstable swings because of the heavy dependence on heavyweights Samsung Electronics and SK Hynix.
Issues are overblown
Economists informed CNBC that the comparability with Japan overstates the quick hazard.
“I believe the likelihood of an actual asset bubble burst in Korea is proscribed,” Kang Min Joo, senior economist for South Korea and Japan at ING, informed CNBC.
She stated that mortgage lending situations have been comparatively tight for a number of years, and authorities have maintained strict controls on loan-to-valuation and debt-to-income ratios. “Whereas the LTV ratio was beforehand as excessive as 80%, it has fallen to beneath 40% and decrease in Seoul space.”
The family debt-to-GDP ratio within the nation stands at 90.14 as of 2024. Though it has fallen from the document excessive of 98.67 in 2021, it nonetheless is the second highest in Asia behind Australia.
Lee’s feedback replicate considerations concerning the current rise in housing costs, quite than an actual asset bubble is about to burst, Kang stated.
That view can be shared by Gareth Leather-based, senior economist for Asia at Capital Economics, who stated “fears of a bubble seem exaggerated.”
He identified that solely property costs in Seoul are rising quickly, however even within the capital, they’re solely 10% above the extent they had been at in January 2022. In cities like Busan, costs have fallen to nearly 80% of January 2022 costs.
Leather-based stated that dangers to monetary stability are additionally restricted by the truth that home consumers are required to place down a big down fee, “so the dangers of them stepping into detrimental fairness and the banks stepping into problem are small.”
Specialists stated that whereas South Korea is unlikely to see a twin asset and market collapse like Japan in 1990, the nation shares a number of monetary and demographic traits with Japan.
Ma Tieying, senior economist at DBS Group Analysis, stated South Korea has as a excessive credit-to-GDP ratio and inventory market capitalization, much like Japan pre-crash, which leaves it uncovered to greater charges, tighter credit score and world shocks.
However Korea shouldn’t be experiencing massive capital inflows or persistent foreign money appreciation seen in Japan a couple of years earlier than the bubble burst, giving the Financial institution of Korea better flexibility to calibrate coverage.
Ma stated the central financial institution has additionally responded pre-emptively to inflation and monetary imbalances than Japan did earlier than its bubble burst.
Following a interval of maximum hypothesis in actual property and shares throughout the Nineteen Eighties, Japan noticed a monetary market implosion within the Nineties when its central financial institution began elevating rates of interest in December 1989, beginning a long time of gradual development.
— CNBC’s Jenny Lee contributed to this report.
