Young Koreans’ debt soars as they turn to crypto, stocks and real estate

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The household debt of young Koreans – those born from the 1980s – jumped to $ 22.7 billion, from $ 3.9 billion last year.

Data from South Korea’s Financial Supervisory Service (FSS), released today by Representative Kim Han-jeong of the Democratic Party of Korea, indicates high lending levels are attributable to increased investment in cryptocurrencies , stocks and real estate.

While millennials and millennials accounted for around 34% of total household debt in Korea in 2019, that figure rose to 45.5% in 2020 and is now at 50.7%. Representative Kim called for government action to help manage debt and reduce the risk of default, saying:

“They lent excessively to buy real estate amid skyrocketing asset prices. Younger generations buried themselves in equity investments and bought cryptocurrencies. “

FSS data provides some degree of granularity, revealing that real estate-backed loans of these generations have increased from $ 2.8 billion to $ 16 billion, while credit loans have increased from 1.1 billion dollars. billion to $ 6.7 billion over the year.

Rising debt has become a staple in the larger socio-economic history of young Koreans. A Bloomberg article published in the fall of 2020, aptly titled “Broke Millennials Turn to Day Trading to Strike It Rich in Korea,” quoted a 27-year-old man who said:

“In Korea, we, in our twenties, have only two ways to get rich: either winning the lottery or trading stocks. We know we will never be rich no matter how much money we earn. We will never earn enough to buy a house.

As the article focused on the day-to-day shift from traditional stocks to apps like Robinhood, the same underlying dynamic – suppressed wages, a “frozen job market” and rising house prices – feeds their dependence on bank loans to make other investments. they think they could be profitable in the medium to long term, like crypto and real estate.

Lee Han Koo, professor of economics at Suwon University, called the dynamic “hopeless”, noting that this socio-economic environment has fueled the perception among young people that commerce represents a “unique opportunity” to break up. get out of an insurmountable impasse.

Related: South Korea’s ‘Kimchi Bounty’ is Back: Is the Bitcoin Rally Starting to Heat Up?

According to an IMF report from August 2020, Korea’s household debt ratio of 180% is now the highest among OECD countries. House prices, as in many OECD countries, have seen an unbroken tear since 2014. While the country’s gross national income per capita is $ 32,047, the median apartment price in Seoul, where half live. of the population and half of the businesses are based – was nearly $ 800,000 last fall.

Locked out of the housing market and trapped by stagnant wages, Koreans’ turn to speculation – ranging from hedge funds to biotechnology to crypto – was at the heart of Bitcoin’s infamous “Kimchi bubble” (BTC) 2017. Long-term economic trends are now exacerbated. By the pandemic, Bitcoin’s premium in Korea hit annual highs again this spring.


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