[Daechang-dong Fact Check] "Did Unsold Units Surge in 2015 and the Market Freeze?" Is It True?

Half the Truth

One of the most contentious points in determining the truth behind the Daejang-dong preferential treatment allegations, which sharply divides political camps and stakeholders, is the ‘2015 housing market unsold inventory status.’ The Daejang-dong development project’s bidding announcement was posted on February 13, 2015. Lee Jae-myung, the Democratic Party presidential candidate (currently Governor of Gyeonggi Province), claims that “at that time, unsold housing units were flooding nationwide” due to the poor market conditions, making it the best project design approach to guarantee a 550.3 billion KRW senior confirmed profit. On the other hand, opposition figures such as Lee Jun-seok, leader of the People Power Party, argue that “there is no way the land right below Pangyo, a golden piece of land, would not sell” (Lee Jun-seok’s Facebook post on the 21st) and insist that more surplus profit recovery should have been implemented.

We examine the real estate market conditions at the time, which marked the starting point of the Daejang-dong development suspicion where private participants made billions in profits.

[Verification Content] On September 24, at a press conference for the ‘Busan, Ulsan, Gyeongnam’ pledge announcement held at the Gyeongnam Provincial Council, candidate Lee Jae-myung said regarding the Daejang-dong project, “At that time, the real estate market was very bad. Unsold housing units were flooding nationwide, and the real estate market was completely frozen. Because of such risks, the confirmed profit was predetermined.”

First, to verify unsold housing statistics, we reviewed the ‘Housing Unsold Inventory Status’ data compiled by the Ministry of Land, Infrastructure and Transport. As of the end of December 2014, the nationwide unsold housing units were 40,379 households, with 19,814 households in the metropolitan area. This means that just before the Daejang-dong project started, the metropolitan area’s unsold housing units were close to 20,000 at year-end, which is more than ten times the unsold housing units in 2020 (nationwide 19,005 households, metropolitan area 1,231 households).

(Source: Ministry of Land, Infrastructure and Transport, Annual Housing Unsold Status)

Looking at the trend of unsold housing units from the Bank of Korea’s Economic Statistics System (ECOS), February 2015, when the Daejang-dong development project bidding announcement was posted, recorded 16,924 unsold housing units in the metropolitan area. This number rose to 30,637 households in December 2015 and then steadily declined to 1,666 households as of June this year. Therefore, compared to the current point in time, it is true that unsold housing units were ‘flooding’ then.

(Source: Bank of Korea Economic Statistics System, Unsold Housing Status)

Additionally, the Bank of Korea Gyeonggi Branch’s 2018 report titled ‘Housing Market Trends and Evaluation in the Gyeonggi Area’ states that unsold housing decreased compared to 2015. The Bank of Korea noted in this report, “The scale of unsold housing in the Gyeonggi area decreased significantly from 26,000 units at the end of 2015 to 7,000 units at the end of August 2018.”

(Source: Bank of Korea Gyeonggi Region Housing Market Trends and Status Evaluation)

However, when narrowing down to the ‘buyer sentiment’ in Seongnam City, which includes Daejang-dong, the situation was somewhat different. Looking at buyer sentiment in the metropolitan area, especially around Seongnam City, rather than the nationwide market, it is difficult to say that ‘the market was frozen.’

According to the monthly sales supply-demand trend announced by the Korea Real Estate Agency, buyer sentiment for apartments in the Seongnam area showed a steadily strengthening trend. In February 2013, the apartment sales supply-demand index for ‘Gyeongbu 1 District in Gyeonggi Province,’ which includes Seongnam City, recorded 79.8, rising to 96.9 the following year, and reached 100.5 in February 2015.

(Source: Korea Real Estate Board, Apartment Sales Supply and Demand Trends)

The sales supply-demand index is calculated by analyzing surveys from member real estate agencies of the Korea Real Estate Agency and the number of online listings, quantifying the ratio of demand to supply. The closer to 0, the more supply exceeds demand; the closer to 200, the more demand exceeds supply. The baseline is 100, and the higher it goes beyond 100, the stronger the buyer sentiment. In other words, during the time of the public offering, apartment buyer sentiment was on a recovery trend. The index rose further afterward, recording 109.4 in February 2016 and 108.7 in February 2018.

Meanwhile, the jeonse (long-term lease) prices in Pangyo also continued to soar at that time. According to real estate information company Real Estate 114, the jeonse price per 3.3㎡ for apartments in Pangyo New Town steadily increased from 11.64 million KRW in 2012 to 18.31 million KRW in 2015. Jeonse prices tend to push up sales prices and can stimulate buyer sentiment.

(Source: Real Estate 114, Annual Jeonse Price per Pyeong in Pangyo New Town)

[Verification Result] Half true: It is true that around February 2015, when the Daejang-dong project plan bidding was announced, unsold housing units were more numerous than now. However, since buyer sentiment was on a recovery trend near Seongnam and Pangyo at that time, it cannot be said that ‘the market was frozen.’ Therefore, this is judged as ‘half true.’

[Reference Materials]

Ministry of Land, Infrastructure and Transport Housing Unsold Inventory Status

Bank of Korea ECOS Unsold Housing Statistics

Bank of Korea Gyeonggi Area Housing Market Trends and Evaluation

Korea Real Estate Agency Apartment Sales Supply-Demand Trends

Real Estate 114, Pangyo New Town Annual Jeonse Price per Pyeong