Expectations for higher home prices refuse to bend, even as outlook shifts from rising to soaring interest rates
The Bank of Korea's monthly Consumer Trend Survey, which asks households about their views on economic conditions, showed the interest rate outlook index at 128 in September. That is up 3 points from the previous month and matches the record high of October 2023, meaning more people now expect interest rates to rise. The interest rate outlook index measures expectations of rate increases six months ahead, and it hit the record high as more consumers anticipated hikes.
In the same survey, the housing price expectations index, which gauges expectations that home prices will rise, held at 125, unchanged from the previous month and still elevated. The survey was conducted from September 9 to 16. By region, Seoul recorded 133, down 1 point from a month earlier but the highest among regions, while the six metropolitan cities posted readings in the low-to-mid 120s. "Home prices in the capital region continued to rise during the survey period, which appears to have kept the housing price expectations index at a high level," said Park Yong-min, head of the BOK's Economic Psychology Survey Team.
Consumer sentiment rebounded. The Composite Consumer Sentiment Index (CCSI) rose 2.1 points from the previous month to 106.6, recovering in a single month after falling 2.3 points to 104.5 in August on the fallout from a stock market correction.
Expectations for price increases also strengthened slightly. The inflation outlook index rose 1 point from the previous month to 150, and the wage outlook index also climbed 1 point to 124. The expected inflation rate, based on one-year-ahead consumer price forecasts, held at 2.7%, unchanged from the previous month. As items affecting price increases, petroleum products (52.7%), agricultural, livestock and marine products (39.9%), and public utility fees (29.8%) drew the highest response rates, while expected inflation rates for three and five years ahead were each flat at 2.6%.
