The new government is pouring significant funds to lift the stagnant economy, bringing much-needed relief to the domestic stock market. The Bank of Korea has lowered interest rates, and the government has drafted two supplementary budgets this year alone. The KOSPI index has surpassed 3,100, leading to evaluations that the domestic market has entered a 'Bull' phase. A financial investment industry official I recently met noted, "About 80% of the current market rise is driven by liquidity."

However, at the same time, troubling indicators are stirring. While the stock market rally continues, apartment prices in Seoul have also surged significantly. According to the Korea Real Estate Board (REB), last week, Seoul apartment prices rose by 0.36% in just a week, recording the largest weekly increase in 6 years and 9 months since the second week of September 2018 (0.45%) during the Moon Jae-in administration.

Concerns have arisen that the flow of liquidity into Seoul apartments could put pressure on the stock market. Park Sang-hyun, an economist at iM Securities, pointed out, "If the sharp increase in Seoul apartment prices continues, the Bank of Korea may delay any further interest rate cuts despite sluggish domestic demand, and the government will inevitably have to implement liquidity regulations such as stringent lending policies."

An apartment sale and rental listing price is posted at a real estate agency in Seoul./News1

He also added, "If market liquidity does not flow to capital markets or corporations but instead enters certain real estate markets, such as Seoul apartments, the positive effects of the large-scale supplementary budget on the domestic economy may be temporary or limited in scope."

Many people believe that through long-term repeated learning, the best asset accumulation method in Korea is not stocks but Seoul real estate. If the current upward trend in Seoul apartment prices continues, funds from the stock market could shift direction to the real estate market at any time.

Of course, the likelihood of such a scenario occurring immediately is low. Historical cases show that it is common for the stock market to show an upward trend during the first year after a new government's inauguration. Especially since President Lee Jae-myung, who promised to breach the 5,000 mark on the KOSPI during his term, stated, "I will make stocks an alternative investment vehicle comparable to real estate," the expected policy effects are high.

Nevertheless, the rise in Seoul apartment prices amid liquidity is a concerning piece of news. It is advisable to conduct checks on what needs to be monitored. First, it would be good to verify how long the upward trend in Seoul apartment prices continues. From the 1st of next month, the three-tier stress debt service ratio (DSR) regulation, which reduces the lending limits, will be implemented. Let’s watch whether the rise in apartment prices subsides following the implementation of the regulation.

The related policies that the government departments operating the task force inspecting the real estate market will announce in the future also attract interest. It will be crucial to see whether specific supply plans that could directly impact Seoul apartment prices are released.

Lastly, for the stock market, which has surpassed 3,000 due to the power of liquidity, to reach the unprecedented mark of 5,000, improvements in corporate performance must support it. It is not just about how much profit increases compared to the previous year, but rather how prominent our corporations show themselves in advanced industries such as artificial intelligence (AI) and robotics, where new value is expected to explode.