The Bank of Korea raised the base interest rate by 0.5 percentage points, and the real estate transaction market is expected to experience a prolonged winter. On the 13th, a red light was on at a traffic signal near an apartment in downtown Seoul.
[Asia Economy Reporter Kim Hyemin] The apartment pre-sale vacancy crisis, which began in provincial areas, is spreading to the Seoul metropolitan area. As the real estate market stagnates and affects the pre-sale market, cases of under-subscription in the main subscription or contract cancellations after winning are increasing. While apartment prices are falling, additional increases in pre-sale prices due to soaring raw material costs are inevitable, raising concerns that unsold units may increase further.
According to the Korea Real Estate Board's Subscription Home on the 19th, 'Pyeongchon Doosan We've The Prime' in Hogye-dong, Dongan-gu, Anyang-si, Gyeonggi Province recently released 111 units as non-priority subscription lots. Although all 178 units were sold out at the end of August during the pre-sale, a large number of buyers dropped out during the official contract process. Only 67 units were contracted, with 62% of buyers canceling their contracts.
The mass contract cancellations appear to be influenced by the declining prices of nearby apartments, the small size of the complex, and location conditions. The pre-sale price for the 84㎡ exclusive area was set at 800 million KRW, about 200 million KRW cheaper than the average market price of newly built complexes in Hogye-dong, but proximity to factories in the Anyang IT Complex was considered a disadvantage. It was difficult to share the living area of Pyeongchon, a first-generation new town, and the distance from elementary schools was also a negative factor for commuting conditions. Although marketed under a brand name, the complex could not withstand these disadvantages amid the real estate downturn.
Cases of contract cancellations are increasing even in the Seoul metropolitan area when pre-sale prices or location become disadvantages. This is also true in Seoul, where subscription enthusiasm remains relatively high. For example, 'Moa Elga Treview' near Cheonwang Station in Oryu-dong, Guro-gu, Seoul, which held a subscription at the end of August, released 129 out of 140 general pre-sale units as non-priority subscription lots. Although it was sold out at the time, over 90% of the winners canceled their contracts. Similarly, 'Dongil Centasia' near Namguro Station, which was pre-sold last month, saw contract cancellations, resulting in 69 units, or 42% of the total 162 units, being released as non-priority lots.
The number of unsold units in the Seoul metropolitan area is rapidly increasing. According to the Ministry of Land, Infrastructure and Transport, as of August this year, the number of unsold units in the metropolitan area, including Seoul, was 5,012 units, more than three times the 1,325 units recorded in January. This is the highest level in two years and eight months since December 2019, when there were 6,202 units. In Seoul, the number rose from 47 to 610 units; in Incheon, from 423 to 1,222 units; and in Gyeonggi Province, from 855 to 3,180 units. The so-called "malignant" unsold units after completion were also counted at 1,230 units. In particular, Seoul saw an increase of nearly 25% in one month, reaching 188 units.
There are concerns that unsold units in the metropolitan area may increase further. Unlike the declining prices of older apartments, the pre-sale prices of new apartments are likely to rise. The volume of pre-sale units is also considerable. According to Real Estate R114, 62,833 units are scheduled to be pre-sold in the metropolitan area alone by the end of this year. Kyunghee Yeo, Senior Researcher at Real Estate R114, said, "From the buyer's perspective, loans are usually necessary, but with rising interest rates, the burden of interest payments increases, so if pre-sale prices are set high, cases of giving up may occur. Depending on the size of the complex, pre-sale price, and location, unsold units in the metropolitan area may increase."
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