Korea’s household net worth shrinks for first time on falling house prices

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South Korea’s household net worth shrank for the first time last year due to falling real estate prices.

The share of real estate in household assets also fell for the first time in 10 years, and the net worth per household dropped for the first time to 520.71 million won ($407,576), data showed Thursday.

According to data from the Bank of Korea (BOK), the net worth of households and non-profit organizations stood at 11,237 trillion won last year, down 317.8 trillion won, or 2.8 percent, from the previous year. This is the first decline since 2008, when the BOK started collecting related data by sector. Non-financial assets of households fell by 302.7 trillion won, mainly due to a decline in real estate assets, while financial net worth fell by 15.1 trillion won. In particular, net worth per household is estimated at 520.71 million won, down 22.3 million won from a year earlier. Given that a significant portion of Korean households’ assets is tied up in real estate, the decline in house prices directly affected household assets.

When looking at the nominal holding gains or losses depending on actual price fluctuations, the nominal holding gains of non-financial assets, including real estate, declined by 74.3 trillion won over the year. This indicates that asset values have dropped by more than 70 trillion won during the cited period. This compares to an increase of 1,357.5 trillion won a year ago. It is the first time in 24 years since 1998 that the nominal holding gains on non-financial assets have declined. In particular, the real holding gains, which exclude the impact of inflation, lost 1,042 trillion won over the year.

Last year, the value of real estate assets fell by 34.9 trillion won to 14,710 trillion won from a year ago. As a result, the proportion of real estate assets in the total non-financial assets declined to 75.8 percent from 77.1 percent a year earlier.

The downturn in the real estate market took its toll. Total land assets amounted to 10,489 trillion, down by 118.9 trillion won, or 1.1 percent, from the previous year, while construction assets rose by 213.5 trillion won, or 3.4 percent, to 6,525.6 trillion. The total market capitalization of domestic housing also fell by 342.8 trillion won, or 5.2 percent, to 6,209 trillion won from the previous year. As a result of the overall decline in asset prices, the net worth of the entire nation, a measure of the wealth of all South Koreans, stood at 20,380 trillion won at the end of last year. This represents only a 2.2 percent increase from a year earlier, and a sharp decline from the previous year’s 11.1 percent increase.