Is the 'Unsold Housing Nightmare' Returning... 'Unsettled Incheon Yeonsu-gu'

Six Years of Unsold Units Since 2010
Up to 3,146 Units Left Unsold
Concerns Over Reverse Jeonse Crisis Due to Many Gap Investments in Songdo

[Asia Economy Reporter Cha Wanyong] Yeonsu-gu, which encompasses Songdo (Songdo International City), is showing heightened concern over the increase in unsold housing units due to the real estate market downturn. This is because the area once suffered from an 'unsold housing nightmare' when the unsold inventory exceeded 3,000 units. With a large volume of move-ins (about 7,000 units) and sales (about 4,000 units) scheduled for this year, the local real estate market is closely monitoring the situation.

A panoramic view of Songdo International Business District.

Unsold Housing Units: From '0' in February Last Year to 244 Units in November

According to the Korea Real Estate Board's subscription website on the 23rd, consecutive unsold units are occurring in the sales of Yeonsu-gu, Incheon, where Songdo International City is located. 'Songdo Station Gyeongnam Honorsville' in Okryeon-dong, which closed its second-priority subscription on the 18th, had only 62 applicants for 94 units. Prior to this, 'Yeonsu World Meridian Urban Foret,' which went on sale in October last year, received applications for only 40 out of 130 units.

Currently, the officially recorded number of unsold units in Yeonsu-gu, Incheon (as of November 2022) is 244 units. Although this accounts for only about 10% of Incheon's total unsold units of 2,471, Yeonsu-gu had zero unsold units until February last year.

Looking back over the past five years, there was an occurrence of 214 unsold units in May 2019, but all were absorbed within two months, and other periods saw sporadic single-digit unsold units.

With unsold units recently accumulating in Yeonsu-gu, concerns are rising about a repeat of the unsold housing nightmare experienced during the global financial crisis. Yeonsu-gu, where the development of the international business district began with the groundbreaking of the Songdo Convention Center in 2005 and where Songdo New City development and residential facilities were established in earnest in 2009, suffered from prolonged unsold housing issues.

At that time, the unsold units in Yeonsu-gu surged from 23 units in April 2010 to 457 units in May and then to 1,491 units in June. The number increased to a maximum of 3,146 units (May 2014), maintaining over 1,000 unsold units until September 2014. From October 2014 to September 2016, hundreds of unsold units persisted, and it was only in October that the unsold inventory was fully cleared.

However, this was short-lived, as 795 unsold units reappeared in January 2017 and took about four months to be absorbed. Consequently, Yeonsu-gu is considered one of the regions most sensitive to fluctuations in the real estate market.

Songdo Move-ins and Sales Flood the Market... "High Possibility of Urgent Sale Listings"

The real estate industry is concerned that unsold units in Yeonsu-gu will significantly increase this year. There is particular worry about whether the market can absorb the flood of units coming from Songdo.

According to the sales industry, the number of units scheduled for sale in Songdo is estimated to reach about 30,000. Of these, approximately 4,000 units are expected to be put on sale this year.

Additionally, about 15,000 units are expected to move in by 2025 in Songdo, with around 7,000 units scheduled for move-in this year alone.

Due to soaring interest rate hikes causing a real estate transaction freeze and reverse jeonse (lease) difficulties, apartments in Songdo are already showing sharp price declines.

An 84㎡ unit at The Sharp Songdo Marina Bay in Songdo-dong was traded for 590 million KRW on the 7th. Considering that the same unit type was traded for 1.245 billion KRW in February last year, this represents a 52.61% plunge. There is also a record of a 660 million KRW transaction last month on the 7th. Although these transactions may be 'gift transactions,' other listings are also uniformly declining.

A representative of a real estate agency in Songdo-dong said, "While there are reports that Seoul is somewhat recovering due to government deregulation, the situation here is negative," adding, "Many landlords are currently struggling to find tenants for jeonse leases, and if the scheduled move-in complexes are released to the market this year, there is a high possibility of a flood of urgent sale listings."