Younger homeowners hit by rising house prices, older owners benefit

Apartment buildings are seen from Mount Nam in central Seoul on Feb. 12. [YONHAP]

 
Rising home prices in Korea have reduced spending and overall economic well-being for younger households while increasing wealth for older homeowners, a Bank of Korea (BOK) report showed on Thursday. 
 
The central bank estimated the housing price elasticity of consumption — how much spending changes when home prices rise 1 percent — based on an analysis of how much of their disposable income different age groups have spent on average since 2013. 
 

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It found a clear decline among households headed by people under 50, challenging the traditional wealth effect theory that higher property values lift spending.
 
For those aged 25 to 39, consumption fell about 0.3 percent when home prices rose 1 percent. Among people in their 40s, spending declined about 0.2 percent. The bank did not find a statistically significant change in consumption among households aged 50 or older.
 
The divergence also appeared in overall economic welfare, which the report defined as non-housing consumption such as food and clothing, benefits derived from housing services and psychological satisfaction from rising asset values.
 
When home prices increased 5 percent, welfare among those under 50 fell an estimated 0.23 percent on average. In contrast, welfare among those aged 50 or older rose 0.26 percent.
 
“Younger people saw their welfare decline as they increased savings for future home purchases or repaid loans,” said Joo Jin-cheol, head of the BOK’s Financial Modeling Team. “Among older people, who already have a high homeownership rate, the asset effect from rising home prices played a dominant role.”
 

A pedestrian looks at house listings at a real estate agency in Gangnam District, southern Seoul, on Feb. 8. [NEWS1]

 
Even among homeowners, the generational gap persisted. Welfare declined among homeowners under 50 who owned low- or lower mid-priced homes, while it increased among those aged 50 or older regardless of the value of their homes.
 
The bank said younger homeowners remain motivated to climb the property ladder, driven in part by demand for housing in areas with strong educational resources for children as well as the desire to own more valuable homes. Many also shoulder heavy loan repayment burdens, which constrains consumption.
 
Older households face weaker incentives to upgrade and have a higher share of multiple-home owners, amplifying the wealth effect. Households that operate monthly rental properties backed by sufficient assets — rather than relying on lump-sum deposit rental arrangements to finance purchases — saw welfare increase regardless of age.
 
The BOK warned that if home prices continue to rise, generational inequality could deepen and weaker consumption among younger people could undermine domestic demand.
 
“Housing cost burdens may also contribute to structural economic problems such as delayed marriage and low birth rates among younger people," the bank added. 


This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY YEOM JI-HYEON [kim.juyeon2@joongang.co.kr]