Investors wary of buying stocks, real estate amid interest risks

Apartment complexes in Seoul are seen from above on March. 21. Yonhap

By Lee Min-hyung

Investors here are growing increasingly wary of buying stocks and real estate in Korea amid growing fears of heightened interest rate volatility.

According to the Korea Exchange, the Volatility Index of KOSPI 200 (V-KOSPI) has come to 21.98 for this year, as of Friday afternoon. The index refers to an expected volatility of the KOSPI 200 index option for the next 30 days. When the main bourse plunges, the V-KOSPI goes up.

The V-KOSPI has in recent months been on a gradual decline, signaling that investors are taking a wait-and-see approach when it comes to the future of the benchmark stock index.

The KOSPI surpassed the symbolic 3,000-mark for the first time in January on a nationwide stock-investment boom led by retail investors. It even reached as high as 3,200 points, but has been in an adjustment period for the past few weeks at around the 3,000-range.

This was due to investors' fears over a possible interest rate hike here amid rising 10-year U.S. treasury yields which hit 1.7 percent recently.

“The recent rise in the market interest rate is expanding volatility in the local stock market, and concerns remain that ample liquidity that was provided after the coronavirus outbreak last year will be gradually scaled down,” eBest Investment & Securities analyst Jun Bae-seung said. “This may slow down the growth of relevant stock indices.”

Investors are showing little sign of continuing their buying spree of apartments in Seoul and its surrounding areas.

According to data by the Korea Real Estate Board, the increase in Seoul apartment prices has remained sluggish for the past six consecutive weeks. The average sales price of Seoul apartments increased by 0.1 percent in the first week of February, compared to a week earlier. But the figure has since declined to 0.06 percent during the second week of March.

This sends a signal that those who plan to purchase apartments here will take a wait-and-see approach before joining the recent apartment-investment boom. Housing prices in the capital city as well as other metropolitan cities have surged throughout 2020, which drove young people, particularly in their 30s, to purchase housing before prices surge further.

But market insiders shared skepticism over a possible drop in prices in the near future.

“Even if the local property market is showing signs of entering an adjustment period amid a weakened buying spree, chances remain slim that housing prices in major cities ― such as Seoul ― will drop by a huge margin due to a lingering supply shortage there,” a real estate industry source said.