Korean Job Discussion Forums

[Who's Your Daddy?]

Looks like a crash is coming in the next 5 years or so.

http://joongangdaily.joins.com/article/view.asp?aid=2936798

"39 percent of people that took out a mortgage are incapable of repaying the principal."

[madoka]

Excuse my ignorance, but assuming the housing bubble burst and all these families were unable to repay their debts, then:

1. Will it affect the won/dollar exchange rate?
2. If so, how?

[PigeonFart]

I would imagine that a Korean housing crash would result in koreans stopping buying homes and getting stuck in negative equity, thus dropping the price even further (negative feedback loop).

This would result in a flight of international capital out of Korean banks (who would invest in korean banks if their was a risk of the banks becoming insolvent). The government might then have to try to support the banks with HUGE amounts of money. They'd have to increase tax to do that. That'd put more stress on an already weak economy.

Luckily the koreans can use their currency as a tool to help solve the problem. They would weaken it (bad news for ESL teachers) in order to attract the international money back, and in order to make their exports more competitive.

So instead of 1,000 won to the dollar, it could be 2,000 won to the dollar. So if you're sending cash back home, you'd lose out big time.
I'm not an economist, i'm just a teacher. I'd like to hear another opinion too.

[el_magico]

Korean banks do not have problem with consumer delinquencies, the consumer delinquency rate is less than 1%, likely due to social stigma of bankruptcy. However the banking sector is very exposed to construction loans, even though the key metric - loan to value ratio - is currently relatively conservative at around 50%, the denominator is based on arguably inflated housing prices so should housing prices start going down the banks will feel it. Furthermore, the banks are decently capitalized (in part due to large foreign reserves) and could withstand to absorb some losses. So, there would have to be a big external shock to the economy for Koreans to start defaulting on their mortgages en masse. That shock could come from ever higher levels of inflation, that the central bank can't counteract by interest rate hikes due to concerns of the household debt.

Rising interest rates would certainly mean higher exchange rate for those of you wishing to expatriate money back home. However, I'd say it is more likely that you will see higher inflation, a bad thing as you will lose purchasing power domestically... you might want to bring that up with your boss when discussing contract renewals.

[Swampfox10mm]

Look for rental prices to go up, up, up, as they have been already.

[eamo]

[Swampfox10mm]

Why sell when you can make a lot of money on rent?

[eamo]

[4 months left]

In the U.S. people can walk away from their house and not have to pay the money back and they could buy with little to no money down. The debt stays with you here and people typically pay 30-50% down on a house here.

[Captain Corea]

[southernman]

With only 1% of Apartment loans not being honoured, then it's not too bad yet. I would fully agree with banks being wary of property developers, they're hardly the beacon of honesty and integrity the world over.

Damn, the way the $NZ dollar keeps going up, I'm just going to take a punt and hope that they Korean Won actually gets stronger. There's no way I'm sending any major money back home at the current exchange rate. Maybe in a couple of years things will be more sender friendly

[el_magico]

As i mentioned previously...

http://blogs.wsj.com/korearealtime/2011/06/13/expatriates-ask-for-a-pay-raise/?mod=WSJBlog

[methdxman]