Supply and Regulatory Aftershocks... Daegu Real Estate Market Shows Signs of Cooling Down

From June, 3 out of 9 housing units remain unsold
'Malignant' post-completion unsold units uniquely increase nationwide
HBSI plunges for 2 consecutive months... lowest nationwide

[Asia Economy Reporter Kim Hyemin] The Daegu real estate market, which once showed signs of overheating, is cooling down rapidly. This is due to the area being designated as a regulated zone in December last year while supply continued to pour in. Experts point out that this clearly demonstrates the impact of the imbalance between regulation and supply expansion on the market.

According to industry sources on the 6th, the enthusiasm for apartment sales in Daegu has noticeably declined since June this year. An analysis of the Korea Real Estate Board's subscription website shows that out of nine apartment complexes launched since June, three remain unsold. This contrasts with the period from January to May, when 19 out of 23 complexes were completely sold out.

According to the Housing and Urban Guarantee Corporation, the initial sales rate in Daegu last year was 100% in the 2nd and 3rd quarters, and 99.8% in the 4th quarter. However, recent indicators suggest that the Daegu real estate market is entering a downturn. According to the Ministry of Land, Infrastructure and Transport, the number of unsold houses, which was only 153 units as of March this year, expanded to over 1,000 units in both May and June. The number of post-completion unsold houses?classified as problematic because they remain vacant even after construction?is on the rise, increasing from 86 units in April to 130 in May and 144 in June. Among metropolitan cities in the provinces, Daegu is the only one showing an increase.

Alongside this, the Housing Business Survey Index (HBSI), which reflects suppliers' outlook on the future real estate market, has sharply declined. According to the Korea Research Institute for Human Settlements, the HBSI forecast dropped from 92.5 in June to 76.6 in July and 59.3 in August, marking a steep decline for two consecutive months. A figure below the baseline of 100 indicates a negative outlook on the future housing business market.

The rapid cooling of the Daegu real estate market is largely due to an oversupply trend combined with the impact of being designated as a regulated area. While supply increased, Daegu was classified as a regulated area in December last year, resulting in strengthened restrictions on subscriptions, loans, and taxation. Amid this, controversies over high sale prices have also emerged, causing demand to sharply decline.

Experts emphasize that a market downturn caused by a supply glut is as risky as overheating. Kim Deokrye, head of the Housing Policy Research Office at the Korea Research Institute for Human Settlements, said, "Daegu has the lowest housing business outlook nationwide, and the market is likely to contract further. It is a time when business strategies that can mitigate supply risks are needed."