President Lee Jae Myung has drawn parallels between South Korea's current real estate situation and Japan's 'lost decades' following its property market crash in the early 1990s. He highlighted that real estate constitutes a significant portion of household wealth in South Korea, with 75.8% of household assets tied to real estate as of March 2025.
Despite these concerns, economists like Kang Min Joo from ING and Gareth Leather from Capital Economics argue that fears of an imminent bubble burst are overstated. They point to tight mortgage lending conditions and a significant down payment requirement for homebuyers as mitigating factors.
While property prices in Seoul have risen, they are only 10% above January 2022 levels, and prices in other cities like Busan have decreased significantly.
Experts acknowledge that while South Korea shares some financial traits with Japan before its crash, it is not currently experiencing the same capital inflows or currency appreciation that characterized Japan's pre-bubble environment, allowing for more flexible monetary policy responses. Overall, while the situation warrants attention, the immediate risk of a real estate collapse appears limited