South Korean households are expected to spend more than they save from 2026 due to the country’s rapid population aging, a central bank report said Wednesday.
The Bank of Korea report estimated the household savings rate to decline from 8.9 percent in 2015 to -3.6 percent in 2030, when the ratio of people aged 65 years and older to total population is likely to rise from 12.8 percent to 24.5 percent over the period.
The savings rate represents the ratio of money set aside by households from their total disposable income. The report forecast the savings rate to hover in the negative territory from 2026 in line with the country’s fast population aging. A negative reading means more households are disposing of real estate or financial assets for spending.
But the bank did not expect the country’s baby boomers born between 1955 and 1963 to rush to dispose of their real assets, which otherwise could cause a sharp drop in property prices.
Data analysis showed savings rates and investments into risky assets waning corresponding with an aging pace in the society, which is consistent with other findings underscoring elderly retirees have less money available for savings and are typically conservative about asset management, said a BOK official.
The latest report, however, said that Korean elderly households are more likely to sell their assets gradually even after the household savings rate logs minus growth, meaning the likelihood of a sudden drop in property prices would be limited. This forecast is based on 2014 data where the country’s top quintile income households tended to dispose of their real assets only after 75 years, some 20 years from their average retirement age.
By Kim Gyu-sik
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]