1. [Background of the Analysis] Overheated housing price expectations can lead to excessive market reactions, such as "maxed-out loans (so-called yeongkkeul)” or “panic buying,” and may pose potential risks to financial stability through sharp increases in asset prices and rising household debt. In Korea, where housing functions as an asset to a significant degree, expectations tend to have a considerable influence on the actual market. Nevertheless, empirical research on this subject remains limited. Accordingly, this study conducts an empirical analysis of the characteristics of housing price expectations, their macroeconomic spillover effects, and their relationship with key policy variables, using the housing price expectations item from the Consumer Sentiment Index (CSI) in the Bank of Korea’s Consumer Survey.
2. [Characteristics of Housing Price Expectations] Housing price expectations exhibit both high volatility and strong persistence. This suggests that while housing price expectations may exhibit significant short-term fluctuations, once a directional trend takes hold, it tends to persist over an extended period. In practice, housing price expectations often move in a consistent direction for a certain period before reversing course, after which they tend to persist in the opposite direction—resulting in pronounced fluctuations and long-lasting cycles. Furthermore, housing price expectations tend to precede actual housing price movements, exhibiting a self-fulfilling nature.
3. [Macroeconomic Spillover Effects] An increase in housing price expectations is found to raise key macroeconomic indicators, including actual housing prices, household debt, industrial production, and inflation. Housing prices and household debt gradually increase following a rise in expectations, reaching their peak approximately seven to eight months later. Notably, beginning around the third or fourth month, the growth in household debt tends to outpace that of industrial production, indicating that overheated expectations may contribute to credit expansion and heighten the risk of financial imbalances.
4. [Correlation to Policy Variables] Monetary policy easing (i.e., policy rate cuts) is found to significantly stimulate housing price expectations. In particular, the stimulative effect becomes substantially stronger when accompanied by macroprudential policy easing. Conversely, when regulatory measures are tightened, the response of expectations tends to be limited. These findings underscore the importance of close coordination with macroprudential policy to mitigate the risk of overheating in housing price expectations during periods of monetary easing.
5. [Counterfactual Scenario Analysis] This study assesses the quantitative impact of housing price expectations on actual housing prices and household debt through a counterfactual scenario analysis. The analysis assumes a scenario where housing price expectations remained anchored at the neutral level observed in April 2020 over the two-year period from May 2020 to May 2022. The analysis indicates that, over the period, housing prices would have increased by approximately half the actual rise (11 percent compared to the actual 24 percent), while the increase in the household debt-to-GDP ratio (based on deposit-taking institutions) would have been about one-third lower (4.9 percentage points compared to the actual 7.6 percentage points) as of May 2022. These results highlight that ensuring the stable anchoring of housing price expectations is essential for effective policy management.