Koreans expect hotter housing market in worry for central bank

THE outlook among South Koreans for home prices rose to the highest level since late 2021, exacerbating concerns for the Bank of Korea as it seeks to avoid causing inflation in real estate prices through a policy pivot signal.

The index gauging the prospect for housing prices rose by 7 points to 115 in July, the BOK said on Wednesday, citing a survey that also showed the outlook for consumer price inflation fell for a second month. Meanwhile, the reading for overall consumer confidence increased to 103.6.

Bank of Korea Governor Rhee Chang-yong said earlier this month that he was concerned with a recent rise in house prices in metropolitan areas, and that the board did not want to be seen as aiding it.

His comments prompted some economists to push back their prediction for a BOK rate cut from August to October. The bank has held its benchmark rate at what it characterised as a restrictive level of 3.5 per cent for a year and a half.

The index for the housing market shows how consumers feel prices would change in a year. The latest reading comes as many apartment prices near their all-time highs in affluent districts such as Gangnam and other downtown areas, in a recovery from a 2022-2023 slump. BLOOMBERG