▲ An apartment complex in Songpa-gu, Seoul
Driven by the continuous upward trend in apartment prices in the Seoul and Gyeonggi regions, consumers' expectations for rising home prices have surged to their highest level in 4 years and 10 months.
Despite pressures from inflation and falling stock prices, consumer sentiment extended its improvement for the third consecutive month, supported by semiconductor-led exports and expectations of wage increases.
According to the results of the Consumer Survey released by the Bank of Korea today (July 28), the Consumer Sentiment Index (CCSI) for July stood at 106.8, up 0.2 points (p) from the previous month.
The CCSI had plummeted by 7.8p from the previous month to 99.2 in April in the wake of the Middle East conflict, but rose for three straight months following May (106.1, +6.9p) and June (106.6, +0.5p).
However, the margin of increase slowed compared to the previous month (0.5p).
The CCSI is an index calculated using six key indices: current living standards, prospective living standards, future household income, future consumption expenditure, current economic judgment, and future economic outlook.
A reading above 100 means consumer sentiment is optimistic compared to the long-term average (2003–2025), while a reading below 100 indicates pessimism.
Among the indices composing the CCSI, the current living standards index (93) fell 1p from the previous month due to persistent high inflation and falling stock prices.
Conversely, the prospective living standards index (98) and future household income index (101) each rose 1p, while the future economic outlook index (92) and future consumption expenditure index (110) remained unchanged from the previous month.
The future economic outlook remained flat despite renewed tensions from the Middle East conflict, bolstered by upward revisions to growth forecasts by major institutions driven by a favorable semiconductor industry turnaround.
Lee Heung-hoo, head of the Economic Sentiment Survey Team at the Bank of Korea, explained, "Despite the deterioration in perceived economic conditions caused by falling stock prices and rising inflation, overall consumer sentiment rose due to semiconductor-led export growth and expectations of wage increases. With consumer sentiment exceeding the long-term average and rising for three consecutive months, it can be generally evaluated that consumers' optimistic perceptions are continuing."
The housing price outlook index came in at 127, up 7p from the previous month.
This appears to be the influence of sustained upward trends in apartment sales and jeonse (lump-sum deposit lease) prices centered around Seoul and the Gyeonggi region.
This is the highest level since September 2021 (128).
The housing price outlook index rose from 121 in December of last year to 124 in January of this year, dropped to 96 in March, and then reversed direction, continuing a steep upward trend for four consecutive months in April (104), May (112), June (120), and July.
An index exceeding 100 means that more consumers predict housing prices will rise a year from now.
Team leader Lee said, "As the recent upward trend in housing prices continues to expand, it appears to be influencing consumer expectations. Measures such as rising loan interest rates due to recent monetary tightening and reductions in commercial bank loan limits have been implemented, and it is necessary to examine how these factors will impact housing price expectations with a time lag."
The current household debt index, which represents perceptions of the current level of household debt compared to six months ago, stood at 100, up 1p from the previous month.
This is the highest figure since April of last year (100).
Team leader Lee explained, "We understand that the current household debt index rose as mortgage loans have recently increased."
The interest rate level outlook index, which forecasts interest rate levels six months ahead, stood at 126, unchanged from the previous month.
It maintained a high level after surging 12p following the reflection of the Bank of Korea's base rate hike stance last month.
Among inflation expectations, the forecast for consumer price inflation over the next year (2.7%) fell 0.1p over the month.
This was the result of declining domestic petroleum prices and the mitigation of the weak won.
Team leader Lee said, "Although the expansion margin of consumer price inflation widened in June, domestic petroleum prices have fallen significantly of late. While this appears to have acted as a factor lowering consumers' inflation expectations, as the recent situation in the Middle East has deteriorated again, driving up international oil prices once more, there is a possibility that it could re-stimulate inflation expectations, so we need to keep an eye on future trends."
(Photo: Yonhap News)
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