[Urgent Unsold Housing Diagnosis]② Reasons Behind Unsold Units... Either Too Expensive or Oversupplied

Unsold Apartments in Seoul Soar from 47 to 953 Units in One Year
Apartment Sale Prices in Redevelopment Projects Rise Over 70% in 5 Years
Daegu, Chungnam, Gyeongbuk, and Gyeonggi Account for Half of Nationwide Unsold Units

[Asia Economy Reporter Cha Wanyong] Despite the continuous decline in existing housing prices, high-priced apartment sales continue in Seoul and the metropolitan area. The gap between sellers' and buyers' desired prices ultimately leads to unsold units. In the provinces where unsold units are accumulating, pre-sold move-in volumes have been flooding since last year. With supply overflowing but demand not supporting it, unsold units inevitably occur in new sales. This is why unsold units are piling up despite the government massively easing real estate regulations to induce market stabilization.

High-priced apartments ignoring reality lead to consecutive unsold units

The number of unsold houses in Seoul, which was only 47 units in January last year, soared to 953 units in December. This is the aftermath of unsold units occurring in high-priced apartment sales that were about 100 million to 200 million KRW more expensive than surrounding market prices (depending on exclusive area), such as Seongbuk-gu's 'Jangwi Xi Radiant', Gangdong-gu's 'The Sharp Park Soleil', Jungnang-gu's 'Riversen SK View Lotte Castle', Mapo-gu's 'Mapo The Classy', and Gangbuk-gu's 'Hanwha Forena Mia' and 'Cantavil Suyu Palace'. Some of these places have been conducting multiple non-ranking subscriptions since last year and offering discounted sales, but unsold units still remain.

The metropolitan area is no different. Unsold units increased sharply from 855 units in January last year to 7,588 units in December. Large numbers of unsold units occurred in complexes that sparked controversy over high prices, such as 'Indeokwon Xi SK View' in Naeson-dong, Uiwang-si, Gyeonggi-do, and 'Pyeongchon Doosan We've The Prime' in Hogye-dong, Anyang-si. In January this year, 'Pyeongchon Centum First' sold in Anyang-si had a dismal subscription performance, with an average competition rate of only 0.30 to 1.

Most of these unsold complexes share the commonality of being cooperative member sale apartments. Since the higher the general sale price, the greater the cooperative members' profit, the sale prices were set high. Some complexes adopted a strategy of post-sale to avoid the price ceiling system and set high prices. However, since last year, due to the impact of rising interest rates and economic recession, apartment actual transaction prices have plummeted, which is pointed out as one of the causes of unsold units.

According to the Housing and Urban Guarantee Corporation (HUG), an analysis of the annual average sale prices of 78 private apartment complexes sold through reconstruction and redevelopment (maintenance projects) by district in Seoul showed that sale prices have significantly increased over the past five years.

In Gangdong-gu, Seoul, Olympic Park Foreon recently went on sale with an average sale price of 38.32 million KRW per 3.3㎡, which is a 71% increase compared to 22.44 million KRW in 2017. In Jung-gu, Seoul, the average sale price per 3.3㎡ last year was about 35 million KRW, up 75.5% from 19.95 million KRW five years ago. In Seocho-gu, when Raemian One Bailey went on subscription schedule in 2021, the average sale price per 3.3㎡ recorded 56.52 million KRW that year.

Another 'volume bomb' in provinces overflowing with unsold units

In the provinces, especially in regions with abundant supply in recent years, unsold units are rapidly increasing. According to the Ministry of Land, Infrastructure and Transport's regional unsold housing status, Daegu (13,445 units), Chungnam (8,509 units), Gyeongbuk (7,674 units), and Gyeonggi (7,588 units) account for more than half of the nationwide unsold units.

In Daegu, new sales, which were 6,893 units in 2016 and 2,925 units in 2017, surged to 85,443 units over the past five years (16,013 in 2018, 19,283 in 2019, 22,599 in 2020, 18,936 in 2021, and 8,612 in 2022). Daegu has many apartments over 20 years old, and these apartments were massively redeveloped over the past five years. The timing of the flood of supply coincided with interest rate hikes and economic downturns, causing unsold units to increase sharply. In fact, Daegu's appropriate annual supply volume is 12,000 units, but last year 20,653 units were supplied.

Chungnam, ranking second in the number of unsold houses, had 66,978 units sold over the past five years. This means an average annual sale of 13,395 units, which far exceeds the 8,160 units in 2016 and 7,362 units in 2017. Especially, sales concentrated in Asan, Cheonan, and Hongseong led to concentrated unsold units in these areas. Currently, Asan records 2,403 units, Cheonan 4,145 units, and Hongseong 1,362 units.

Gyeongbuk region also sold 54,843 units over the past five years. About half of these were concentrated in Pohang and Gyeongju. In particular, Pohang conducted a large number of subscriptions last year during the real estate slump, causing unsold units to surge. Last year, there were 19 subscription complexes in Gyeongbuk, with nearly half (9) in Pohang. Of the 7,674 unsold units in Gyeongbuk, 59% (4,546 units) occurred in Pohang. Gyeongju has 1,474 unsold units.

In Gyeonggi-do, unsold units are widely spread, with high numbers recorded in Anseong (1,239 units), Yangju (1,094 units), and Pyeongtaek (1,684 units), where there were many sales issues.

The problem starts now. This year, an unprecedented volume of move-in units will flood these areas. According to Real Estate R114, in Daegu, where 20,653 units were supplied last year, 36,059 units are scheduled for move-in this year, an increase of 74.59% (15,406 units).

Chungnam plans 26,701 units for sale this year, a 7.62% (1,891 units) increase from 24,810 units last year. Gyeongbuk expects 11,231 units for move-in supply, and Gyeonggi-do has 113,692 units scheduled for move-in.