Daegu Real Estate Market in 'Great Chaos'... Serious Unsold Units but Over 10,000 Households to Flood Market by Year-End

An apartment complex in Dalseo-gu, Daegu.

[Asia Economy Reporter Cha Wanyong] The real estate market in Daegu Metropolitan City, where unsold housing units are accumulating, is showing signs of turmoil. With a stagnant sales market and an oversupply, apartment prices are beginning to decline in earnest. Meanwhile, with around 10,000 additional housing units scheduled for sale by the end of the year, it is expected that the increase in unsold units and price drops will continue for the time being.

According to the Ministry of Land, Infrastructure and Transport and the real estate industry on the 7th, Daegu accounts for 25.4% (8,301 units) of the nationwide unsold housing units (32,722 units), and about 10,000 units are scheduled for sale by December. Some analyses suggest that including unsold units after sales contracts fall through, the actual number of unsold houses has already exceeded 10,000 units.

In fact, all complexes sold in Daegu this year were partially or entirely undersubscribed in the first priority application phase. In the first quarter, the ratio was 0.18 to 1, in the second quarter 0.71 to 1, and in the third quarter 0.52 to 1, indicating that all complexes sold in Daegu failed to find buyers.

As the unsold housing crisis deepened, the Housing and Urban Guarantee Corporation extended the designation of unsold housing management areas for four districts including Dong-gu until the end of this month.

Nevertheless, Daegu’s real estate market continues to show a worsening trend. The decline in Daegu apartment sale prices has continued for 45 consecutive weeks. Due to the influence of new housing supply, inventory accumulation persists, with Suseong-gu at -0.33%, Dalseo-gu and Dalseong-gun at -0.27%, and Jung-gu at -0.23%.

As a result, the average apartment sale price in Daegu, which approached 410 million KRW last year, has fallen to the 380 million KRW range. Since breaking the 400 million KRW mark in March (399.93 million KRW), prices have not recovered for six months. The highest average sale price in Daegu was 407.82 million KRW recorded in September last year.

Daegu’s average apartment sale price of 400 million KRW first surpassed this level in July 2021, 32 months after the Korea Real Estate Board began compiling statistics in December 2018 (291.98 million KRW), and remained above it for eight months.

Cases of giving up on pre-sale rights are also increasing. For example, in Dong-gu’s Yulamdong ‘Ansim New Town City Pradium,’ which began occupancy last month, listings with a negative premium of 40 million KRW have appeared.

The industry expects the oversupply in Daegu’s housing market to continue for more than a year. According to the Korea Real Estate Board, the number of housing units entering the market in Daegu this year is 24,969 units, and it is predicted to increase to 32,554 units next year.

In fact, construction is currently underway in many places in Daegu. There are 124 ongoing construction sites. There are also many redevelopment and reconstruction projects. Currently, there are 242 redevelopment and reconstruction associations. Due to the nature of association projects, once started, it is difficult to stop midway even if market conditions are unfavorable, because of the heavy financial burden from loans taken out to proceed with the projects.