Amid rising concerns that South Korea is entering a period of stagflation, real estate experts are warning that the housing market may be heading for a crash.

In addition to the number of unsold homes exceeding the number recorded during the Asian financial crisis, property prices in the "bubble seven" areas have been dropping by large margins.

The so-called bubble-seven areas, includes regions where property prices are thought to have been pushed up by speculation.

According to real estate experts, the country's housing market has followed the economy in showing signs of stagflation and because real estate investments typically require large funds, consumers could put off buying properties.

Experts are also voicing concern that the country's property bubble could burst due to deteriorating economic conditions.

In addition to falling sales and prices, high interest rates on mortgage loans are putting further pressure on the housing market. At present, mortgage loan interest rates have risen to the highest level since the Asian financial crisis and some banks' rates have gone up as high as 9 percent.

In consideration of the current condition of the economy and the housing market, further increases in interest rates could deal a severe blow to the housing market, a local bank official said.

However, experts are predicting that the dire conditions in the country's housing market are unlikely to improve in the near future.

According to a researcher, property markets in different countries are showing signs of coupling with that of other nations. He added that as property prices in the United States are expected to continue falling until next year and as the Korean government will be unable to introduce countermeasures before next year. Therefore, current conditions are likely to prevail until at least the second half of 2009.

The lack of government's intervention has also been blamed for the current status of the country's ailing housing market.

"Uncertainties in the market are being amplified because the easing of property-related regulations expected of the new government are being delayed," Kim Hyun-ah, a researcher with Construction and Economy Research Institute of Korea was quoted as saying.

"To prevent a crash, the government should revise related regulations in advance and introduce new measures at an appropriate time."

Other industry experts also warned that smaller construction firms are experiencing hardship due to the market slowdown and that the government must ease related regulations as soon as possible to boost he industry out of the slump.