Korea, Rep. Price-to-Income Ratio

About the Price-to-Income Ratio

The Price-to-Income Ratio is an indicator that shows the level of housing prices relative to households' annual income. This indicator is the value of housing prices divided by average annual income, indexed to a base year (2015=100). For example, if the index is 150, it means that the burden of home purchase has increased 1.5 times compared to 2015. The higher this ratio, the more difficult it becomes for the population to purchase housing.

This indicator is important because it allows for a comprehensive evaluation of housing market overheating and household purchasing power. It is possible to understand not just simple housing price increases, but the actual difficulty of purchase. For policymakers, it serves as important reference information when assessing the stability of the mortgage market and household debt risks. It also functions as an indicator for measuring young people's homeownership opportunities and intergenerational economic disparities.

As a general trend, in developed countries, the Price-to-Income Ratio has been on an upward trend over the past few decades. This is influenced by multiple factors including the continuation of a low interest rate environment, increased investment demand, and supply shortages. In particular, in major urban areas, this ratio tends to significantly exceed the national average. When this indicator rises excessively, policy authorities need to consider strengthening financial regulations and implementing macroprudential policies.