The younger generation in South Korea has incurred a debt soaring from 34% in 2019 to 50.7% presently.
Younger Koreans’ born from the 1980s household debt has risen to $22.7 billion, up from $3.9 billion last year.
The high levels of lending are apparently due to a surge in investments in cryptocurrencies, equities, and real estate, according to data from South Korea’s Financial Supervisory Service (FSS), which was provided today by Representative Kim Han-Jeong of the Democratic Party of Korea.
In 2019, millennials and Gen Z accounted for around 34% of total household debt in Korea; by 2020, that figure had risen to 45.5%, and it is presently at 50.7%.
Rep. Kim has called on the government to take steps to help manage the debt and lessen the possibility of default, saying:
“They have been lending excessively to buy real estate amid surging asset prices. The young generations have been burying themselves in stock investment and buying cryptocurrencies.”
According to the FSS data, home-backed lending has climbed from $2.8 billion to $16 billion in these generations, while credit loans have increased from $1.1 billion to $6.7 billion in the same time period.
Rising debt has become an integral aspect of younger Koreans’ overall socioeconomic experience. One 27-year-old was quoted in a Bloomberg piece titled “Broke Millennials Turn to Day Trading to Strike It Rich in Korea,” which was published in fall 2020.
“In Korea, us 20-somethings only have two ways to get rich: Either we win the lottery or trade shares. We know we will never be rich on whatever wages we earn. We will never earn enough to buy a home.”
While the article focused on the shift to day trading traditional stocks on apps like Robinhood, the same underlying dynamic — stagnant wages, a “frozen job market,” and rising real-estate prices — is fueling their reliance on bank loans to make other investments they believe will pay off in the medium or long terms, such as cryptocurrency and real estate.
This dynamic has reinforced a belief among millennials that trading provides a “once-in-a-lifetime opportunity” to break out of an intractable standstill, according to Lee Han Koo, an economics professor at the University of Suwon.
Koreans now have the highest household debt-to-disposal income ratio of 180% among OECD countries, according to an IMF report dated August 2020. Since 2014, house prices have been on an unbroken upward trend in many OECD countries.
The typical price of apartments in Seoul, where half of the population lives and half of the companies are based, was close to $800,000 last fall, despite the country’s gross national income per capita of $32,047.
Koreans’ shift to speculation — from hedge funds to biotech to crypto — was central to Bitcoin’s (BTC) famed “Kimchi bubble” of 2017. They were locked out of the property market and plagued by stagnant wages.
the epidemic exacerbating longer-term economic trends, Bitcoin’s premium in Korea soared to new all-time highs this spring.
