Issue Restructuring and rising volatility of capital and financial markets

Summary

Population decline and ageing do more than shrink the labour force and tax base: they are changing capital flows and the structure of financial and asset markets. Because capital accumulation has traditionally tracked population density and economic activity, demographic change directly affects the pricing and supply-demand balance of real estate and financial assets. As population concentrates in Korea's capital region, provincial property and real assets face shrinking demand and downward price pressure, and capital and investment become entrenched in metropolitan areas. Older people are selling more property and drawing down deposits, while the asset-accumulation capacity of the working-age population and young households weakens. The survey warns that supply-demand imbalance and capital concentration could polarise regional asset prices and raise financial-market volatility, creating a new source of risk to financial stability.