Housing Business Conditions Nationwide in May Worsen Compared to Last Month... "Impact of Material Supply Shortages, High Interest Rates, and Serious Accident Punishment Act"

Jusan-yeon 'May Housing Business Sentiment Index'
National Sentiment Index 82.6... Down 18.6 from April

May Nationwide Housing Business Outlook Index / Data provided by Housing Industry Research Institute

[Asia Economy Reporter Hwang Seoyul] The housing business outlook for May is expected to deteriorate compared to last month. The construction industry’s concerns are deepening as the supply shortage of materials caused by COVID-19 and the Ukraine war, worsening investment sentiment, and the contraction of the real estate market coincide.

According to the ‘May Housing Business Outlook Index’ announced by the Korea Housing Industry Research Institute (hereinafter referred to as KHIRI) on the 17th, the nationwide outlook index for this month was 82.6, down 18.6 points from last month’s 101.2. Although it exceeded the baseline (100.0) for the first time in 10 months last month, it is predicted that the housing business will deteriorate again within a month.

The Housing Business Outlook Index is calculated monthly by surveying housing business operators on their business performance and outlook. It is a supply market indicator that comprehensively assesses the housing business from the supplier’s perspective. The survey targets members of the Korea Housing Association and the Korea Housing Builders Association. The index baseline is 100, with below 85 indicating a downturn phase, 85 to less than 115 indicating a stable phase, and 115 or above indicating an upturn phase.

Specifically, the housing business outlook in the metropolitan area is expected to reverse significantly from the improved atmosphere last month. The metropolitan outlook index dropped 22.8 points from last month’s 113.3 to 90.5, shifting from an upturn to a stable phase. Seoul recorded 93.7, down 30.2 points from the previous month, while Incheon and Gyeonggi recorded 84.3 and 93.4, respectively.

The provinces are also on a downward trend. The outlook for metropolitan cities and city/county areas in the provinces was 81.8, down 7.6 points from the previous month. In particular, the outlook for Busan and Ulsan sharply deteriorated, falling 29.0 points and 25.0 points to 79.3 and 75.0, respectively.

Researcher Cho Kanghyun of KHIRI stated, “Domestic construction projects are experiencing difficulties in material supply due to reduced supply volume and supply chain disruptions caused by COVID-19 and the Ukraine war, resulting in supply shortages and rapid price increases.” He added, “With China’s resource weaponization strategy joining in, a short-term resolution seems difficult.”

He continued, “The enforcement of the Serious Accident Punishment Act, worsening investment sentiment due to rising raw material prices, contraction of the real estate market caused by high interest rates, and increased uncertainty due to the Ukraine war are intensifying difficulties in the construction industry, making institutional improvements and support urgently needed.”

Meanwhile, despite the overall deterioration in the housing business outlook, five cities and provinces?Gwangju (82.3→84.2), Daejeon (86.6→94.4), Chungbuk (70.0→71.4), Chungnam (100.0→105.8), and Gyeongnam (78.5→78.9)?showed slight increases in their outlooks compared to last month. Among these, Gwangju, Daejeon, Chungbuk, and Gyeongnam also responded that the sales market is expected to improve.