Two years from now, carpet-bagging traders from Chongjin could be buying up real estate in Kangnam

… if Jasper Kim is correct that Korea’s housing bubble is about to burst.

There are some eerie echoes of the U.S. subprime mania as well. The first sign of trouble is the general consumer confidence that real-estate prices will go up. A recent Bank of Korea consumer survey index for housing found the highest level of optimism since the survey started a year ago. Purchasers of Korean real estate have a sense that a broader economic recovery is underway. This is the same psychology that influenced so many bad decisions by American homebuyers in 2005 and 2006.

Koreans today also have benefited from cheap credit. The Bank of Korea’s decision on Friday to hold interest rates steady at 2% means that interest rates have hovered at the same historically low rate for the past eight months. Most mortgages feature a fixed rate for the first few years before it converts to a floating rate. While mortgage payments today look relatively affordable, when interest rates begin to hike up, Korea’s first-time mortgage borrowers are likely to feel the pain.

One economist offers an opposing view.