Consumers have not pulled back from expectations that home prices will keep climbing, even after President Lee Jae-myung raised the prospect of a housing market crash.
The Composite Consumer Sentiment Index (CCSI) stood at 106.6 in September, up 2.1 points from 104.5 the previous month, according to a consumer survey released by the Bank of Korea on the 23rd. The central bank attributed the gain to improved expectations for household income, supported by solid conditions in the real economy as swings in the domestic stock market narrowed.
The index had risen for three months from May on strong semiconductor exports before reversing course with a 2.3-point drop in August, then rebounded this month. The increase was the largest since May, when the index gained 6.9 points, and left the reading at the same level as June. The CCSI has stayed above 100 for five consecutive months since April, when it registered 99.2.
The CCSI is calculated from six sub-indexes covering current living conditions, the outlook for living conditions, expected household income, expected spending, the current economic assessment and the economic outlook. A reading above 100 means consumer sentiment is optimistic compared with the long-term average for 2003 through 2024, while a reading below 100 indicates pessimism.
Among the six components, the current economic assessment posted the biggest gain, rising 4 points to 83. The index climbed as solid trends in exports and consumption continued and stock market volatility eased. Expected household income rose 2 points to 102, the highest level in seven months since February, when it stood at 103. It advanced from the previous month on expectations that stronger growth would improve income conditions. The outlook for living conditions rose 1 point to 98, expected spending rose 1 point to 110 and the economic outlook rose 1 point to 90. Current living conditions were unchanged from the previous month at 92.
The housing price outlook index was unchanged at 125. The Bank of Korea said the index held steady as factors pushing prices up, such as the steep rise in apartment prices in the greater Seoul area, were offset by downward factors including housing policy measures and an expected increase in the base rate.
The housing price outlook index had risen for four straight months to 127 in July, the highest since September 2021, when it reached 128, before falling 2 points last month. "It is holding at a high level compared with the long-term average of 107," said Park Yong-min, head of the Bank of Korea's economic sentiment survey team. "Because home prices in the greater Seoul area are rising at a rapid pace, we believe expectations for further price gains remain strong." Park added that by region, Seoul was the highest at 133, while the six major metropolitan cities and other areas were in the low-to-mid 120s.
Last month, Lee wrote on X, formerly Twitter, that "people interested in real estate speculation should pay attention to the part of the news reports saying the Bank of Korea's rate is expected to be 3.5% in the first quarter of next year." He added that he had "instructed officials to prepare a system for buying up large numbers of homes below a certain price threshold to hold as public housing, in case home prices plunge because of a surge in loan delinquencies and foreclosure auctions."
