Homeowners are consuming less
The results contrasted with data collected before the 2007-8 global financial crisis, during which the BOK recorded a higher consumption rate among people who own their house.
The study, led by researcher Hwang Sang-pil, recorded people’s average propensity to consume (APC), which is the proportion of household income spent on goods and services.
Between 2003 and 2007, the APC of homeowners stood at 77.5 percent, but the figure fell to 73.9 percent between 2011 and 2013.
But the consumption rate by renters fell only marginally by 0.8 percent between the two periods.
Low-income homeowners significantly cut back on spending, with their APC rate falling from 105.6 percent to 95 percent. Since households that own their residence account for about 70 percent of the total, their lack of spending caused the overall consumption rate to decrease.
Between 2003 and 2007, the APC for all households was 77.5 percent, but it dropped to 74.7 percent between 2011 and 2013.
Hwang said that complex factors contribute to reduced spending among homeowners.
“Coupled with the shrinking appetite for purchasing houses and declining collateral value, other social phenomena such as an aging population also add to homeowners’ reduced consumption,” he said.
Hwang added that the study is significant because a bad housing market can negatively effect consumption.
“The government needs to come up with macro-economic and real estate policies that acknowledge that housing market conditions can have a tangible effect on consumption,” Hwang said.
But he also explained that the situation is different when the real estate market is in good shape.
“When things are good for the housing market, household expenditures will not necessarily increase in line with that,” Hwang said.
Other research indicates that homeowners feel the pinch more than those who rent houses either on a monthly basis or through jeonse, a lump-sum deposit.
Statistics Korea found that more than 70 percent of households with homeownership have outstanding debts. But people who rent their homes showed a lower rate, of 66.6 percent for those with jeonse and 56.2 percent for people who pay monthly rent.
BY PARK EUN-JEE[firstname.lastname@example.org]