Fertility rates in East Asia are plummeting at an alarming pace. Recent data highlight that Korea and Hong Kong SAR are among the most impacted, with their total fertility rates (TFR) – a measure indicating the average number of children a woman would give birth to during her lifetime – sinking to 0.78 and 0.7, respectively, in 2022. These are the lowest figures ever recorded for these countries.
The Unprecedented Fall: Termed “super-low fertility” or “ultra-low fertility”, these rates hint at an unparalleled trend in modern advanced economies. Korea, in particular, has seen a rapid transition. A country with TFRs soaring over four in 1970 plummeted to below two by the 1980s and experienced another drop in the late 2010s.
Demographers are alarmed by projections indicating that Korea’s population could shrink by 30% over the next 50 years. An even starker statistic suggests that by 2070, nearly half of South Korea’s people will be 65 or older.
Socioeconomic Triggers: Juwan Park’s recent tweets resonate with many young Koreans, shedding light on the country’s apprehension towards parenthood. Economic pressures discourage young couples from tying the knot and starting families, contributing to the low birth rate. An intensely competitive labour market, epitomized by tireless shifts in significant corporations and long commutes prevents Koreans from even forming families let alone raising one!
Will the ultra-low rate slow down housing prices in time: A study, Long-Run Effects of Super Low Fertility on Housing Markets by Jangyoun Lee and Hyunduk Suh, focused on how the super-low fertility trend affects the Korean housing market:
- Housing Prices: Prices will likely surge till 2035 due to an aging populace. Post-2035, the super-low fertility trend could lead to a dip in housing prices.
- Interest Rates: The real interest rates could wane till 2050 on the current, a byproduct of the fertility crisis and aging demography.
- Governmental Interventions: Strategies like slightly increasing the housing supply might reduce the impact of the initial price spike but won’t notably arrest the predicted post-2035 slump.
- LTV (Loan to Value) Ratio Policy: A reduced LTV cap might inadvertently boost housing prices, favoring the older demographic while proving detrimental for the youth.
- Population Policy: Initiatives encouraging population growth could act as a buffer against a future dip in housing prices. However, this may come at a cost for the older populace’s wealth.
What they are saying: Lee and Suh highlight the negative effects of sustained low fertility rates on long-term housing market stability. While an ageing population might temporarily maintain high housing demand and limited supply, a prolonged decline in birth rates suggests an eventual drop in housing prices by 2035 at the earliest. This means the South Korean government must implement proposals ASAP to increase housing supplies and strategies to promote population growth to counteract the falling birth trend instead of waiting for the effects of super-low fertility to kick in.
Our stance: If cost of living in Korea keep surging until 2035, it’s going to hurt everyone in South Korea, not just the younger generations . Elevated housing prices will continue to hinder employment and stifle innovation. Additionally, rising living costs have been linked to increased mental health risks and many postponing family plans in South Korea, which will keep popping open more known and unknown issues.