Apathetic Despite Deregulation... Apartment Buying Sentiment Plunges to the Bottom

Seoul Apartment Buying Sentiment Hits Lowest Level in 10 Years

Photo by Asia Economy

Despite the government repeatedly implementing deregulation measures to prevent a hard landing in the real estate market, buyer sentiment shows no signs of rebound. The nationwide apartment sales supply-demand index has fallen below the 80 mark for the first time in 3 years and 4 months, and Seoul has dropped to its lowest level in 10 years.

According to the Korea Real Estate Board on the 11th, this week (as of November 7), Seoul's apartment sales supply-demand index stood at 70.7, down 2.2 points (p) from last week's 72.9. This marks the 27th consecutive week of decline since the first week of May (91.1) and the lowest level in 9 years and 8 months since the fourth week of February 2013 (70.1). The sales supply-demand index being below the baseline of '100' indicates that there are more sellers than buyers in the market. The nationwide apartment sales supply-demand index recorded 78.5, breaking below the 80 level. This is the lowest figure since the second week of July 2019 (78.8).

As the real estate market has fallen into a slump this year, the government lifted regulation zones twice in June and September. In September, a significant deregulation was implemented by removing regulation zones from all local areas except Sejong and some outer areas of Gyeonggi Province in the metropolitan area. However, this failed to stop the overall downward trend. On the 10th, the government went further by lifting many regulation zones in the metropolitan area and Sejong, excluding Seoul.

While some cheers have emerged in the market following the successive deregulation measures, the prevailing assessment is that it is still difficult to completely reverse the current situation. The Housing and Urban Guarantee Corporation (HUG) designated Anseong City and Yangju City in Gyeonggi Province as management areas on the 16th of last month. Despite the easing of regulations related to taxes, subscription, and loans after being removed from the adjustment target areas, it was insufficient to stop the decline in housing prices.

As long as interest rate hikes and concerns about economic recession persist, the downward trend is likely to continue. A Korea Real Estate Board official said, "Due to concerns about further declines in housing prices and expected increases in the base interest rate, buyer hesitation continues, and the sharp decrease in transactions is intensifying."

Together with buyer sentiment, apartment prices are also plummeting to record lows. This week, Seoul apartment prices fell by 0.38% compared to last week. This marks the 24th consecutive week of decline and is the largest weekly drop since the Korea Real Estate Board began price surveys in May 2012. Last week, nationwide, metropolitan area, and local apartment sales and jeonse prices, as well as Seoul jeonse prices, all recorded their largest declines ever.