As fixed expenses like monthly rent and loan interest rise, concerns are growing that household spending power may be further squeezed by stock market adjustments and high inflation. With increasing housing and financial costs, households are likely to cut back on discretionary spending such as dining out, clothing, and leisure activities. Analysts warn that if households tighten their wallets, the recovery of domestic demand could be delayed, putting additional pressure on sectors closely tied to daily life, such as small businesses and retail.
According to the Seoul Real Estate Information Plaza, the proportion of monthly rent in apartment lease transactions in Seoul reached 51.0% from January to September this year, up 7.3 percentage points from the same period last year. This marks the first time that monthly rent has accounted for more than half of lease transactions during this period.
The increase in monthly rent is largely due to a sharp decline in jeonse (long-term lease) transactions. While the volume of monthly rent transactions decreased by 2.8% compared to the previous year, jeonse transactions plummeted by 27.5%.
Monthly rent levels have also risen. According to the Korea Real Estate Agency, the average monthly rent for apartments in Seoul last month was 1.661 million won, an increase of 218,000 won from a year ago. The median monthly rent rose from 1.2 million won to 1.4 million won during the same period.
Since monthly rent is a fixed monthly expense, if income does not increase alongside it, households will have less money available for other spending. While switching from jeonse to monthly rent reduces the burden of securing a deposit, if the monthly rent exceeds the savings from reduced loan interest, overall spending capacity may actually decrease.
The burden of loan interest is also a factor constraining consumer spending. The Bank of Korea raised the benchmark interest rate to 3.00% in August. According to national data, the average monthly interest cost per household increased by 12.1% in the second quarter compared to the same period last year. Households with loans face the dual burden of monthly rent and interest payments.
Stock market adjustments can pressure household consumption through asset losses. The KOSPI index closed at 5,554.22 on October 15, down 7.57% from the previous trading day, primarily due to declines in semiconductor stocks. Although it rebounded to 5,768.01 on October 16 and 19, it did not fully recover the losses. Households with significant stock investments may delay spending plans or reduce expenditures due to asset losses.
The recovery of consumer spending is also uneven. According to national data, the retail sales index fell by 1.8% in August compared to the previous month. A household trend survey for the second quarter showed that the average real consumer spending growth rate was only 0.4% compared to the same period last year. While nominal disposable income increased by 5.2%, the average consumption rate dropped by 1.2 percentage points to 69.2%, indicating a decrease in the proportion of income spent on consumption.
With ongoing pressures from inflation and interest rates, combined with rising housing costs and asset losses, prolonged consumer weakness may be on the horizon. Households with limited income and savings are likely to feel the pressure to cut back on spending even more.
Ma Chang-seok, a researcher at the Korea Development Institute (KDI), recently assessed that the rise in prices is more strongly linked to supply-side cost increases rather than demand pressures from expanded consumption. He noted, "Considering these factors, the contraction of domestic demand could act as a constraint on the macroeconomy."
He added, "If consumer conditions worsen, it will inevitably have a cascading negative impact on gross domestic product (GDP), and given the ongoing uncertainties both domestically and internationally, such as the U.S.-Iran conflict, predicting the timing of a recovery in consumer spending is challenging."
* This article has been translated by AI.
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