South Korea's policy chief, Kim Yong-beom, has raised concerns that the substantial wealth generated by the AI-driven semiconductor boom could disproportionately flow into the real estate market, rather than being distributed more broadly through wages or productive investments. This warning comes as South Korea experiences double-digit nominal growth for the first time in over two decades, a pace largely attributed to the soaring profits of its chipmakers. Kim emphasizes that if this national wealth is absorbed into "unearned real estate income" and concentrated among a select few, the economic boom will not be sustainable.
Kim's apprehension stems from historical patterns where excess liquidity in South Korea has consistently found its way into property. He highlighted the significant gap between real GDP growth of 3.8% and real gross domestic income growth of 13.2% in the first quarter, indicating that rising chip prices have boosted the country's purchasing power far more than its actual output. This income gain, he suggests, could materialize in coming quarters through bonuses, wage increases, and repatriated export proceeds, potentially stimulating luxury spending and property demand. Apartment prices in Seoul have already seen a continuous rise for 72 consecutive weeks as of mid-June.
To counter this risk, Kim proposed a "normalisation of property taxation," suggesting adjustments to property and capital-gains taxes. While he did not provide specific policy details, his phrasing underscores a distinction between wealth created through productive activities and wealth derived from real estate ownership. The Bank of Korea also recently maintained its policy rate at 2.5% but signaled a more hawkish stance due to mounting inflation pressures and better-than-expected economic growth, further complicating the economic landscape. The concern about liquidity spilling into the housing market is reportedly shared across various government officials. The potential for the AI-fueled semiconductor windfall to concentrate gains within a narrow segment of society, rather than fostering broader economic growth, is a key consideration for President Lee Jae-myung's administration.
