Home
News
The loans were used for investment in crypto, stocks, and real estate
- Increased debt burden due to pandemic induced lockdowns
- The younger generations are borrowing to invest in stocks and cryptocurrencies.
- The socio-economic condition has fuelled a perception that trading provides once in lifetime opportunity.
It is a common phenomenon- Cryptocurrency is very popular in nations with a high inflation rate. Investors invest in cryptocurrency to prevent the erosion of the values of their assets. However, the younger generation in South Korea, also termed millennials or people between the ages of 24 to 40, are having a trying time in South Korea.
High inflation and wage freeze leads to the increased debt burden
South Korean economy is hit by high inflation and wage freeze due to Covid-19 pandemic induced lockdowns. Young South Koreans’ debt soars as they turn to cryptocurrency trade, stocks, and real estate.
The debt on young South Koreans born from the eighties onward has surged from $3.9 billion last year to a whopping $22.7 billion today.
The latest data released by South Korea’s Financial Supervisory Service (FSS) revealed that a lot of lending and most of the loans were taken by the nation’s younger generations. Representative Kim Han-Jeong of the Democratic Party of Korea said that most loans were utilized for investments in cryptocurrencies, stocks, and real estate.
In 2019 millennials and Gen Z accounted for roughly 34% of total household debt in Korea. However, in 2020 the figure grew to 45.5%, and today the debt stands at 50.7%. Kim has appealed to the government to provide aid to manage the debt and lower the risk of default.
Kim revealed that lending had been done profusely mainly to buy real estate amid surging asset prices. However, the younger generations are borrowing indiscriminately and using the funds to invest in stocks and cryptocurrencies.
The FSS data has also revealed a lot of interesting facts. For example, the younger generation’s home backed lending has surged from $2.8 billion to $16 billion, while credit loans increased from $1.1 billion to $6.7 billion in the year 2021.
South Korea is facing double-digit inflation, and ordinary South Koreans see steady erosion in the values of their assets. As a result, rising debts have become an integral part of the ordinary younger generation of Koreans.
Suppressed wages, a “frozen job market,” and rising real-estate prices have forced young South Koreans to turn to banks for loans. The bank loans are then invested in real estate or cryptocurrency, hoping that returns in the medium- or long-term will one day cover both the loans and bring economic prosperity.
In an article, Bloomberg highlighted the plight of a young South Korean who said that he could never earn enough to buy a home on whatever wages he makes. So his only option is to get a bank loan and try his luck by trading shares.
False Perception that that trading provides once in a lifetime opportunity
An economics professor at the University of Suwon, Lee Han Koo, has termed the situation desperate. The present socio-economic condition has fuelled a perception that trading provides lifetime opportunities and can strike gold.
The IMF has also warned that household debt-to-disposable income of ordinary South Koreans has reached 180%, which is the highest among the OECD countries. In addition, real estate prices have skyrocketed since the economic boom of 2014. The national income per capita is $32,047 for an average South Korean, while the median price of apartments in Seoul was close to $800,000 last fall.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
