(LEAD) Lee calls for closer monitoring of household debt

(ATTN: UPDATES with latest data on household credit in 6th para, warning of possible
property bubble burst in last 2 paras)
By Lee Chi-dong

SEOUL, March 25 (Yonhap) -- President Lee Myung-bak said Thursday that his
government should more closely monitor the pace of household debt growth, adding
that chances are low that the problem will have any immediate impact on the
health of the Korean economy, according to Lee's office.
Presiding over the weekly emergency economic policy meeting, Lee also ordered a
thorough review of trends in the country's housing prices and construction
sector, which heavily affect the financial health of households.
"Chances are low that the current level of household indebtedness will lead to
financial instability but (the government) should closely monitor the speed of
household debt growth and its impact on households and financial circles," Lee
was quoted as saying by Kim Eun-hye, spokeswoman for the presidential office,
Cheong Wa Dae.
Thursday's session, the 52nd of its kind, focused on reviewing the household debt
problem in South Korea, one of Asia's leading economies, as concerns are mounting
that rapidly growing household debt could weigh on the nascent economic recovery.
A household here had an average of 43 million won (US$38,000) in liability last
year, up 1.2 million won from 2008, according to data by the Bank of Korea.
South Korea's total household credit, which refers to loans extended by financial
institutions and credit purchases, recorded its largest expansion in three years
during the fourth quarter of 2009, it said. As of last December, outstanding
household credit totaled 733.7 trillion won, up 20.9 trillion won, or 6.6
percent, from three months earlier.
Economic policymakers say household debt is still at a manageable level, as the
country's housing prices remain stable and banks are in relatively good financial
health. But analysts have said the speed of household debt growth is worrisome.
The president added, "In particular, the government should take a more wary look
at the trends in house prices and the construction industry since real estate
accounts for a big part of household debt."
A think tank at the state-funded Korea Development Bank (KDB) sounded the alarm
over the country's housing market, saying it may suffer Japanese-style real
estate deflation.
The KDB Research Institute warned in a report earlier this week that apartment
prices here are too high compared with household income, and said the bubble in
the country's housing market may burst in the near future, just like those in
Japan and the United States.
lcd@yna.co.kr
(END)

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