Unstoppable Housing Subscription Fever in South Korea Despite COVID-19

[Asia Economy Reporter Kim Yuri] Despite the overall economic activity contraction due to concerns over the novel coronavirus infection (COVID-19), the enthusiasm for subscription in the new housing market shows no signs of cooling. Nearly 100,000 applicants flocked to just two complexes in the Incheon area, indicating that the overheated subscription trend, which began in earnest in the second half of last year, is continuing into the spring housing market. Although the housing transaction market has been significantly contracted following the government's stringent loan regulations, demand for newly supplied apartments remains undiminished.

According to the Korea Real Estate Board on the 25th, 58,021 applicants?the largest ever in the Incheon area?applied for the first-priority subscription of 804 units at 'Hillstate Songdo The Sky' in Songdo International City, Yeonsu-gu, Incheon, held the previous day. This number is nearly 5,000 more than the previous record of 53,181 applicants for the 'Songdo The Sharp Central Park Phase 3' in Songdo International City last September, which was the highest number of applicants for apartment subscriptions in the Incheon area to date.

In particular, for the 84㎡ B-type units, of which only 54 were supplied, 14,707 applicants applied, resulting in a competition rate of 272 to 1. Terrace houses and top-floor penthouses priced well over 2 billion KRW also recorded double-digit competition rates, filling the units with residents. Considering the recent government loan regulations that have dampened the high-priced apartment transaction market and the fact that apartments priced over 900 million KRW are ineligible for interim payment loans, this is an unusual outcome.

On the same day, 'Hillstate Bupyeong' in Sipjeong-dong, Bupyeong-gu, Incheon, which also held a first-priority subscription, attracted a large crowd. With 48,048 applicants for 487 units, all supply was subscribed in the first priority. Combining the two complexes, nearly 1,300 units were supplied with close to 100,000 subscription accounts pouring in. Both complexes, which received subscriptions that day, were apartments unveiled as cyber model houses without physical showrooms due to the COVID-19 impact.

The industry cites the fact that these areas are excluded from government-regulated zones such as speculative overheating districts and adjustment target areas as the reason for the large number of applicants. An industry official explained, "The Incheon supply market seems to have stimulated demand due to the short resale restriction period of six months," adding, "It is also evidence that liquidity in the market continues to flow steadily into the real estate market."

The subscription enthusiasm in non-regulated areas is not limited to the metropolitan area. Even in Daegu, where economic activities have virtually come to a halt due to COVID-19, 7,485 applicants applied for 245 units of 'Bongdeok 2nd Phase Hwaseong Park Dream' on the same day, completing the subscription schedule in the first priority.

Earlier, on the 17th, 'Ssangyong The Platinum Haeundae' in Jung-dong, Haeundae-gu, Busan, recorded an average competition rate of 226 to 1 in the first-priority subscription. Haeundae-gu was removed from the adjustment target areas last year along with Dongnae and Suyeong-gu. Additionally, 'Forena Busan Deokcheon' supplied in Deokcheon-dong, Buk-gu, Busan, on the 11th, attracted 14,920 applicants for 169 units, reaching an average competition rate of 88 to 1.

Experts expect this subscription enthusiasm to continue for the time being in areas with favorable conditions. This is because the market environment has been created where ultra-low interest rates continue to channel idle funds into the real estate market. However, some suggest that if the real economy contraction due to the COVID-19 situation intensifies, the subscription market may shrink. Ham Young-jin, head of the Zigbang Big Data Lab, said, "If the shock to the real economy increases, the supply market will inevitably be affected," and predicted, "In this case, a polarization phenomenon in subscription between popular and unpopular areas will appear."