Construction Companies Weigh Timing of Sales
Burden of Increasing Unsold Units Amid Weakening Homebuyer Sentiment
[Asia Economy Reporter Cha Wanyong] The housing sales market is facing an emergency. Amid a nationwide increase in unsold apartments due to the real estate market downturn, a large-scale supply of 163,000 units is scheduled after Chuseok. Construction companies, already struggling with poor market conditions, are busy adjusting schedules and preparing countermeasures under pressure that they may have to compete fiercely.
According to Real Estate R114 on the 10th, from today, Chuseok day, until the end of the year, a total of 162,892 apartment units (based on total households, including rentals) will be released nationwide. Of these, 76,321 units are in the metropolitan area and 86,571 units are in provincial areas. This accounts for about 40% of the total supply planned for this year.
With supply concentrated in a short period, the sales industry is facing difficulties. Some are rushing to launch sales before additional interest rate hikes, expected by the end of the year, trigger further instability, while others are considering postponing until next year.
An official from a major construction company said, "Since the real estate market is very weak, we internally considered postponement, but as additional rate hikes are expected by the end of the year, we decided to hasten the sales schedule."
On the other hand, an executive from a mid-sized construction company said, "If it were Seoul units, where demand still exists, we would proceed with sales no matter what, but since unsold units are increasing recently in Gyeonggi Province, we decided to postpone, partly voluntarily and partly involuntarily."
This is why schedules are being adjusted... 'The Worst Sales Environment'
The real estate market conditions are so poor that construction companies are considering changing sales schedules. According to the Ministry of Land, Infrastructure and Transport, housing transactions from January to July this year totaled 349,860, a 46.0% decrease compared to the same period last year. This is the lowest in five years for the same period. The transaction volumes were 501,000 in 2018, 381,000 in 2019, 762,000 in 2020, and 648,000 in 2021, respectively.
By region, the metropolitan area recorded 16,734 transactions, down 22.9% from the previous month and 60.2% from the same month last year. Provincial areas recorded 22,866 transactions, down 20.0% from the previous month and 51.2% from the same month last year.
The decrease in housing transactions has led to an increase in unsold homes. Last month, nationwide unsold homes totaled 31,284 units, up 12.1% (3,374 units) from the previous month (27,910 units). In the metropolitan area, unsold units were 4,529, up 1.6% (73 units) from the previous month (4,456 units), and in provincial areas, 26,755 units, up 14.1% (3,301 units) from the previous month (23,454 units).
Subscription competition rates have also declined. According to Real Estate R114, the average apartment subscription competition rate nationwide from January to August this year was 10.41 to 1, a sharp drop compared to 19.79 to 1 last year. The first-priority competition rate also fell from 19.32 to 1 last year to 10.06 to 1 this year.
The subscription competition rates in the metropolitan area, including Seoul, which showed record-high rates last year, have similarly declined. Seoul's subscription competition rate was 164.13 to 1 last year, reaching triple digits, but dropped to 29.84 to 1 this year. Gyeonggi Province fell from 28.65 to 1 to 8.58 to 1 during the same period, and Incheon slightly decreased from 20.26 to 1 to 19.48 to 1.
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