By Kim Kwang-tae
SEOUL, Jan. 30 (Yonhap) -- In a clear sign of decoupling from the United States and other major economies, South Korea's housing market remains stuck in a severe slump, sparking worry over its negative impact on the overall economy, analysts said Wednesday.
Prices of apartments in Seoul dipped 4.5 percent last year, the biggest decline since 1998 when South Korea was hit hard by the Asian financial crisis, according to data compiled by South Korea's top lender Kookmin Bank.
The downturn in South Korea marks a striking contrast to signs of recovery in property markets in the U.S. and China as well as Hong Kong.
Prices of new homes in the U.S., an indicator of house price trends, rose for 10 consecutive months between March and December in the latest sign of the market rebounding from weakness.
In China, a downward trend continued, but the pace of decline has been narrowing since September, according to HI Investment & Securities. In December, home prices just dipped 0.1 percent from the same period last year.
Home prices in Hong Kong soared 23.7 percent in December, and Singapore has unveiled a set of measures to try to cool the real estate market.
Market watchers point out the latest development indicates South Korea has decoupled from other major economic powers when it comes to the housing market.
South Korea's moribund housing market is feared to weigh down Asia's fourth-largest economy, as it could undermine consumer spending in a country where real estate accounts for about 70 percent of household assets.
"The real estate downturn is the biggest stumbling block to the recovery of consumer spending as well as a major drag on the economy's revival," said Park Seok-hyun, an analyst at HI Investment & Securities.
Park Hyung-jung, an economist at Meritz Securities, echoed this view, saying, "South Korea's economic rebound could be relatively weak this year due to the negative impact of the property slump on private consumption."
South Korea's economic growth tumbled to a three-year low of 2 percent in 2012 as exports and domestic demand remained weak amid the protracted eurozone debt crisis.
On Jan. 11, the Bank of Korea (BOK) cut its 2013 growth outlook to 2.8 percent from 3.2 percent while it left the key interest rate unchanged at 2.75 percent for the third straight month.
On top of the property market, South Korea's stock and currency markets are also showing signs of decoupling from major overseas markets, casting a cloud over the future of the local economy, experts said.
Foreigners offloaded a net 1.23 trillion won worth of local shares between Thursday and Tuesday, which analysts say heralds the start of overseas investors' exit from the South Korean stock market.
Adding to the strain for the South Korean economy, the local currency has been rising rapidly against the U.S. dollar and the Japanese yen due to aggressive monetary easing by economic powers, sapping the profitability of South Korean exporters, which compete with their Japanese rivals.
South Korea heavily depends on exports, which account for about 57 percent of the country's total output, to fuel its economic growth. A strong won hurts South Korea's exporters by making their products more expensive in global markets.
For 2012, the won gained 7.6 percent against the greenback from a year earlier, while it soared 19.6 percent to the yen over the same period, according to the BOK.
Park Yu-na, a researcher at Dongbu Securities Co., said there are growing expectations that South Korea's central bank could cut its key interest rate due to escalating concern over the negative impact of the won's rapid ascent on exports and the economy's recovery.
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