South Korean President Lee Jae-myung has invoked the iconic real estate collapse in Japan from the early 1990s as he plans to adjust tax policies to stabilize the housing market. His remarks have also sparked concerns about the direction of the Seoul real estate market.
Lee stated that "many people" worry South Korea may repeat Japan's fate, falling into a "lost era" lasting 20 to 30 years. He was referring to Japan's "Lost Two Decades," when economic growth entered a prolonged slump after the real estate and stock market bubbles burst.
On Thursday, during a public symposium on housing policy, Lee pointed out that the Tokyo property market "burst like a balloon" in the early 1990s, using this to warn of overheating risks in the South Korean real estate market.
Lee added that real estate accounts for the largest share of household wealth in South Korea. Data shows that South Korea is one of the countries globally where household wealth is highly concentrated in real estate.
As of the end of March 2025, tangible assets accounted for 75.8% of total household assets in South Korea, while financial assets only made up 24.2%.
Several economists interviewed said that comparing South Korea to Japan overestimates the immediate risks.
Kang Min-ju, Senior Economist for South Korea and Japan at ING Group, stated, "I believe the probability of a tangible asset bubble bursting in South Korea is limited."
She noted that South Korea's mortgage lending policies have remained consistently tight for years, with regulators strictly controlling loan-to-value ratios and debt-to-income ratios. "The loan-to-value ratio previously reached as high as 80%, but has now dropped to below 40%, with even stricter standards in the Seoul area."
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