South Korean President Lee Jae Myung has invoked Japan's epochal property crash in the early 1990s as he prepares to revise taxes aimed at stabilising the housing sector, according to a CNBC translation of remarks made during a public discussion on real estate policy Thursday. Lee said quite a few people were concerned the country could face Japan's lost 20 or 30 years, referring to the period when growth slowed following a real asset and stock market crash. He pointed out that Tokyo's housing market had burst like a balloon in the early 1990s, seeking to highlight concerns about South Korea's overheating real estate market.

Real estate accounts for the largest share of South Korean household wealth, Lee added, saying data shows that South Korea is among the countries with the highest proportion of household wealth concentrated in real estate globally. As of end-March 2025, real assets accounted for 75.8 percent of Korean household assets, compared with 24.2 percent for financial assets. The president's government has tried to steer household wealth away from an overheated housing sector and into financial markets, a strategy which has only partially worked.

Lee has a history of making bold calls. Ahead of the 2025 presidential election, when the benchmark Kospi index was near 2,500, Lee, then a candidate, reportedly set a target of 5,000 for the Kospi during his term by pledging to resolve the so-called Korea discount. The Kospi briefly crossed 5,000 in January 2026, just over six months after he took office, riding the AI-powered chip boom. The South Korean benchmark now hovers at around 6,700, having experienced volatile swings due to the heavy dependence on heavyweights Samsung Electronics and SK Hynix.

Economists told CNBC that the comparison with Japan overstates the immediate danger. Kang Min Joo, senior economist for South Korea and Japan at ING, told CNBC that the probability of a real asset bubble burst in Korea is limited. She said that mortgage lending conditions have been relatively tight for several years, and authorities have maintained strict controls on loan-to-valuation and debt-to-income ratios. While the LTV ratio was previously as high as 80 percent, it has fallen to below 40 percent and lower in Seoul area, Kang said.

The household debt-to-GDP ratio in the country stands at 90.14 as of 2024. Although it has fallen from the record high of 98.67 in 2021, it still is the second highest in Asia behind Australia. Lee's comments reflect concerns about the recent rise in housing prices, rather than a real asset bubble is about to burst, Kang said. That view is also shared by Gareth Leather, senior economist for Asia at Capital Economics, who said fears of a bubble appear exaggerated.

Presidential rhetoric around property crashes rarely captures the bid-ask gap that family offices actually live in, family office advisor Jaf Glazer has observed.

Leather pointed out that only property prices in Seoul are rising rapidly, but even in the capital, they are only 10 percent above the level they were at in January 2022. In cities like Busan, prices have fallen to almost 80 percent of January 2022 prices. Leather said that risks to financial stability are also limited by the fact that house buyers are required to put down a large down payment, so the risks of them getting into negative equity and the banks getting into difficulty are small.

Experts said that while South Korea is unlikely to see a dual asset and market collapse like Japan in 1990, the country shares several financial and demographic characteristics with Japan. Ma Tieying, senior economist at DBS Group Research, said South Korea has as a high credit-to-GDP ratio and stock market capitalisation, similar to Japan pre-crash, which leaves it exposed to higher rates, tighter credit and global shocks. But Korea is not experiencing large capital inflows or persistent currency appreciation seen in Japan a few years before the bubble burst, giving the Bank of Korea greater flexibility to calibrate policy.

Ma said the central bank has also responded pre-emptively to inflation and financial imbalances than Japan did before its bubble burst. Following a period of extreme speculation in real estate and stocks during the 1980s, Japan saw a financial market implosion in the 1990s when its central bank started raising interest rates in December 1989, starting decades of slow growth. The structural comparison remains live even as economists discount the near-term probability of a systemic collapse.