The housing cost indicators released by the National Statistical Portal (KOSIS) are sounding alarm bells for the economy. Last month, the consumer price index for rental housing rose by 1.4% compared to the same month last year, marking the largest increase in nearly three years and ten months since December 2022. Notably, the rent price increase surged to 1.5%, the highest level since December 2013. The rental market has seen four consecutive months of rising prices, creating a cloud of uncertainty that extends beyond mere housing instability to the broader economy.
The fundamental principle of economics is supply and demand. Regions such as Ulsan (2.4%), Seoul (2.1%), and Sejong (1.6%) have rental price increases that exceed the national average, primarily due to a decrease in new housing supply and a scarcity of available units. When supply diminishes, prices inevitably rise, adhering to basic market laws.
Additionally, stricter regulations on jeonse loans have further restricted the availability of rental properties. Tenants are being pushed into the monthly rental market, accelerating the trend of 'jeonse to monthly rent.' Regulations that ignore market principles and disrupt natural flows have ultimately become a boomerang, increasing the housing cost burden on ordinary citizens.
As makeshift solutions accumulate without a solid foundation, market distortions deepen. Experts point out that the sharp rise in rental prices stemming from real estate issues must be addressed through fundamental housing policies and an expansion of housing supply. If the government resorts to excessive cash support to stimulate consumption in a struggling economy, it will only add liquidity to the market, further fueling inflation.
Ultimately, this approach wastes public funds without achieving desired policy goals. More concerning is the fact that the virtuous cycle of household economics is being obstructed. Last year, the average deposit for jeonse households was 217.97 million won, a 34.9% increase compared to 2019, while the amount borrowed to secure these deposits surged by 53.0% to 46.39 million won during the same period.
If more ordinary citizens are forced to take on debt to manage soaring housing costs amid rising market interest rates, private consumption will struggle to recover. The Korea Development Institute (KDI) has diagnosed that rising interest rates and stagnant wage growth will constrain household consumption capacity.
Even if certain export industries, such as semiconductors, experience a boom, a freeze in private consumption—the root of domestic demand—will prevent economic warmth from spreading throughout the economy. Housing stability is the starting point for a healthy economy. The government must resist the temptation of short-term regulations or populist measures and return to the fundamental principle of stable housing supply. Implementing a consistent real estate policy based on principles to alleviate housing cost burdens is the only way to restore common sense to the struggling economy and pave the way for domestic recovery.
* This article has been translated by AI.
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