South Korean President Lee Jae-Myung speaks at the opening ceremony of the 48th UNESCO World Heritage Committee at the BEXCO Convention and Exhibition Center in Busan on July 19, 2026. (Photo by: JUNG YEON-JE/POOL/AFP via Getty Images)
Jung Young Jae | AFP | Getty Images
South Korean President Lee Jae-myung has cited Japan’s landmark real estate crash of the early 1990s to stoke concerns about Seoul’s real estate market as he prepares for tax reforms aimed at stabilizing the housing sector.
According to a CNBC translation, PM Lee said that “a significant number of people” were concerned that Japan would face 20 or 30 years of Japan’s “lost” years. Mr Lee was referring to Japan’s “lost two decades”, when growth slowed following the collapse of real assets and stock markets.
At a public debate on real estate policy on Thursday, he sought to highlight the overheating of South Korea’s real estate market, pointing out that Tokyo’s housing market “popped like a balloon” in the early 1990s.
Mr. Lee further said that real estate accounts for the largest proportion of household assets in South Korea, and data shows that South Korea is one of the countries with the highest concentration of household assets in real estate worldwide.
As of the end of March 2025, real estate assets account for 75.8% of household assets in South Korea, and financial assets account for 24.2%.
South Korean presidents have a history of making bold statements.
Ahead of the 2025 presidential election, when the benchmark Kospi index was near 2,500, then-candidate Lee reportedly pledged to resolve the so-called “Korea discount” and set a Kospi index target of 5,000 during his term.
of Kospi Riding the boom in AI-powered chips, that number briefly exceeded 5,000 in January 2026, just over six months after he took office.
Lee’s government is trying to divert household wealth from the overheated housing sector to financial markets, but this strategy is only partially working.
South Korea’s benchmark has experienced volatile fluctuations due to heavy dependence on leading companies Samsung Electronics and SK Hynix, and is currently hovering around 6,700.
concerns are overblown
Economists told CNBC that comparisons with Japan exaggerate the immediate danger.
“I think there is a limited chance that the real asset bubble will burst in Korea,” Kang Min-joo, senior economist for Korea and Japan at ING, told CNBC.
He said mortgage lending conditions have been relatively strict in recent years, with authorities maintaining tight controls on loan-to-appraisal and debt-to-income ratios. “The LTV ratio used to be as high as 80%, but it has fallen to less than 40% in the Seoul area.”
The country’s household debt to GDP ratio is 90.14 as of 2024. Although this has fallen from the all-time high of 98.67 in 2021, it remains the second-highest level in Asia after Australia.
Mr Kang said Mr Lee’s comments reflected concerns over the recent rise in house prices rather than a real estate bubble about to burst.
Gareth Leather, senior economist for Asia at Capital Economics, took a similar view, saying: “Bubble fears appear to be overblown.”
He pointed out that only real estate prices in Seoul are rising rapidly, but even in the metropolitan area they are only 10% above January 2022 levels, and in cities like Busan, prices have fallen to nearly 80% of January 2022 levels.
Leather said risks to financial stability are also limited by the fact that homebuyers are required to make large down payments. “Therefore, the risk of homebuyers going into negative equity and banks experiencing difficulties is small.”
Experts said that while South Korea is unlikely to experience the dual wealth and market collapse of Japan in 1990, the country shares some fiscal and demographic characteristics with Japan.
Ma Cheol-young, senior economist at DBS Group Research, said South Korea, like Japan before the financial crisis, has a high credit-to-GDP ratio and high stock market capitalization, which leaves it exposed to rising interest rates, credit tightening and global shocks.
However, South Korea has not experienced the large-scale capital inflows or sustained currency appreciation seen in Japan a few years before the bubble burst, giving the Bank of Korea more flexibility to adjust policy.
Ma also said that the People’s Bank of China has been more proactive in responding to inflation and financial imbalances than Japan was before the bubble burst.
After a period of extreme speculation in real estate and stocks in the 1980s, Japan experienced a financial market collapse in the 1990s, and the central bank began raising interest rates in December 1989, beginning decades of low growth.
—CNBC’s Jenny Lee contributed to this report.
