[First Half Review]② Seoul Housing Sales 'Warmth'... Polarization with Repeated Undersupply in Provinces

Seoul 52:1 vs Daegu 0.07:1 'Polar Opposites'
"Exhausting Remaining Unsold Units Crucial Amid Economic Downturn"

Editor's NoteThe real estate market in the first half of this year was marked by a chaotic tug-of-war between buyers and sellers. With interest rate hikes and the collapse of the U.S. Silicon Valley Bank (SVC), buyer sentiment plummeted, and until February, transaction volume, the sales supply-demand index, and the actual transaction price index remained in a stagnant phase. The number of unsold homes exceeded 70,000 units, triggering fears that the market had reached a 'danger level,' which overshadowed the sales market, and construction companies postponed their sales schedules one after another. As concerns over a real economy downturn grew, the government swiftly announced the 1·3 measures covering subscription, taxes, and loans, along with a special Booming Housing Loan to ease the financial burden on actual buyers. Since early April, buying demand has revived mainly for mid- to low-priced apartments under 900 million KRW, narrowing the price decline and even causing apartment prices to rise month-over-month in some areas. This sparked debates between those who believe the housing prices have bottomed out and those who remain cautious.
The jeonse (long-term lease) market followed a similar trajectory to the sales market. In complexes with large supply in areas like Gangnam, Seoul, listings appeared at prices several hundred million KRW below market value, and actual contracts were made, pulling down jeonse prices. The increased interest rates on jeonse loans compared to last year shifted demand from jeonse to monthly rent, and the decrease in jeonse demand and falling jeonse prices deepened the reverse jeonse phenomenon alongside jeonse fraud.
The sales market shows a stark contrast between Seoul and other metropolitan areas versus provincial regions. While the metropolitan area's subscription competition rate, which had seen many undersubscribed units earlier this year, rose to 24:1 this month, and the no-quota subscription for Heukseok River Park Xi in Dongjak-gu, Seoul attracted an astonishing 930,000 applicants, subscription results outside Seoul are dismal. The first-priority subscription competition rates in major provincial cities all failed to exceed 1:1. This polarization is expected to continue as long as the provincial housing market remains sluggish.
Experts predict the real estate market will remain flat in the second half of the year. Concerns over a reverse jeonse crisis persist, and the possibility of further interest rate hikes remains open, making a rebound unlikely. Recently, the depletion of urgent sales and rising asking prices have increased the entry price burden, leading to a stronger wait-and-see stance among buyers.

The keyword for the sales market in the first half of this year can be summarized as polarization between Seoul and provincial areas. Seoul rekindled interest in sales, which had been sluggish last year, attributed to the pause in the high interest rate hike trend and the government's regulatory easing at the beginning of the year. In contrast, provinces are burdened with a backlog of unsold units, and except for a few complexes, undersubscription is rampant, making it difficult to find signs of market recovery overall.

City apartments viewed from Namsan, Seoul / Photo by Yonhap News

According to the Korea Real Estate Board's Subscription Home and Real Estate R114 on the 30th, the nationwide apartment subscription competition rate averaged 8.28:1 in the first half of this year (January to June 26). Although lower than the first half of last year (12.32:1), it is somewhat less cooled compared to the second half of last year (4.06:1), when the real estate market downturn intensified.

By region, Seoul recorded the highest competition rate at 52.36:1. Following Yeongdeungpo Xi Dignity's first-priority average of 198.76:1 in March, Saejeol Station Doosan We've Trigeum posted a competition rate of 78.9:1 in May. Both complexes achieved 100% contract completion.

Accordingly, Seoul's unsold housing units surged from 996 in January to 2,099 in February but decreased consecutively in March and April. Although there was a slight increase in May, it remains at about half the February level.

Recently, a frenzy has also swept no-quota subscriptions (jupjup) in some Seoul complexes. The Heukseok River Park Xi in Dongjak-gu, which offered only two units, attracted over 930,000 applicants. Driven by expectations of about 500 million KRW in capital gains upon winning, it recorded the highest number of applications for a single complex on the 27th. Among these, one unit was for no-quota subscription, which drew an astonishing 829,804 applicants, breaking the previous record held by Eunpyeong-gu DMC Fine City Xi (which had about 298,000 applicants for one unit).

However, outside Seoul, the cold wind persists. Provinces account for 58,066 units, or 84%, of the total 68,865 unsold units nationwide.

Among them, Daegu's unsold units reached 12,733, the only city among 17 metropolitan cities and provinces to exceed 10,000 units. Its subscription competition rate was the lowest at 0.07:1 as of June this year. Following Daegu were Jeonnam (0.14:1), Jeju (0.16:1), Ulsan (0.21:1), and Gangwon (0.38:1), all showing low competition rates.

In the metropolitan area, Incheon recorded a competition rate of 1.15:1 in the first half, falling short of last year's second half (3.45:1). Gyeonggi Province showed a competition rate of 6.4:1, similar to last year's annual rate, but except for a few complexes like Godeok Xi Centro (45.33:1), most recorded single-digit competition rates or failed to meet the number of units offered.

Kwon Il, head of the research team at Real Estate Info, said, "Timing is crucial for sales, and Seoul caught the right wave. Olympic Park Foreon (Dunchon Jugong reconstruction) and Jangwi Xi Radiant (Jangwi 4 district redevelopment), which had unsold units at the end of last year, were all sold out after the government's regulatory easing this year, and Yeongdeungpo Xi Dignity appeared just in time. However, since the economic downturn is prolonged, it is important to properly clear the remaining unsold units nationwide."