[Apartment 'Big Spenders' in Their 30s]② "House Prices Will Rise in 2-3 Years"... Half-Price Pre-Sales Fuel Buying Sentiment

Background of Becoming a Major Buyer in Their 30s
Housing Permits, Construction Starts, and Sales Plummet This Year
Sale Prices Rise Monthly

In the housing sales market, the emergence of people in their 30s as major buyers is analyzed to be influenced by a sharp decline in housing permits, construction starts, and pre-sale volumes?leading indicators of housing supply?and continuously rising pre-sale prices. Due to concerns that rising raw material costs, fears of unsold units, and increasing financial costs are shrinking housing supply and potentially driving up house prices, people in their 30s have actively engaged in purchasing. Additionally, the monthly rising pre-sale prices have reinforced the perception among people in their 30s that "today's house prices are the cheapest," leading to an increase in buying momentum.

According to the Ministry of Land, Infrastructure and Transport on the 14th, the number of housing construction starts from January to May this year was 77,671 units. Compared to the same period last year (January to May), when construction starts were 149,019 units, this represents a 47.9% decrease?almost halving.

Pre-sale volumes also sharply declined from 96,252 units in the same period last year to 46,670 units this year, a 51.5% drop. Housing permit approvals also decreased. During the same period, permits fell from 209,058 units to 157,534 units, a 24.6% reduction.

Considering that housing is typically supplied 3 to 5 years after permits and 2 to 3 years after construction starts, these trends could become a burden on housing supply in the next 2 to 3 years. Especially, if demand increases after interest rates stabilize and buyer sentiment recovers but supply does not keep pace, it could become a factor pushing up house prices.

The recent notable increase in apartment purchases among people in their 30s appears to be due to a learning effect from their experience during past real estate booms, when supply shortages failed to meet demand, causing house prices in certain areas to skyrocket. This has led them to buy homes in advance.

Yeokyunghee, Senior Researcher at Real Estate R114, said, "In Seoul, pre-sale housing supplied mainly through the 3rd New Towns and metropolitan area land development districts has limitations in meeting demand, and if redevelopment and reconstruction pre-sale speeds do not improve, housing move-in volumes are expected to be insufficient after 2025." She added, "Concerns about supply shortages and demand for new housing seem to have led to increased buying activity among younger generations."

In fact, market participants involved in supply are reluctant to initiate new housing projects. According to the Korea Construction Association, construction orders in April this year decreased by 44.0% compared to the same month last year.

A representative from a mid-sized construction company said, "If we used to launch 6 to 7 pre-sales in the first half of each year, this year there are none. Construction costs have risen due to labor, raw materials, and financial expenses, but we cannot arbitrarily raise pre-sale prices, making it difficult to generate profits."

Concerns about unsold units have spread nationwide, leading to frequent postponements of pre-sales. According to the real estate platform company Zigbang, the pre-sale volume surveyed on June 1 was 37,733 units. However, upon re-survey, the actual pre-sale volume was only 9,766 units, resulting in a supply performance rate of 26%. This means only one out of four units was actually supplied.

Developers building houses also often face financial bottlenecks that disrupt construction progress. A representative from developer A said, "If the extension of bridge loans (short-term loans for land acquisition and permits in the early project phase) fails, losing the deposit is the only consequence, but if the bridge loan fails to convert to PF (project financing), financial costs continue without project progress." He added, "There is also anxiety because even extensions guaranteed by the government have a deadline until next year's general election."

The monthly rising pre-sale prices have also encouraged purchases by people in their 30s. As pre-sale prices inevitably rise due to increased raw material costs, labor costs, and high interest rates, more buyers perceive now as the bottom and are moving to secure their homes.

Senior Researcher Yeokyunghee said, "With pre-sale prices trending upward, younger generations moved early, and a mood to ride the wave of a strong subscription market formed, making young people the main players in the housing market."

This atmosphere can also be seen in the subscription competition rates for small apartments. In the first half of this year, the average subscription competition rate for small apartments in Seoul was 53.7 to 1, an increase of more than 10 applicants compared to 43.07 to 1 in the first half of last year.

The highest competition rates for major pre-sale volumes sold out in Seoul this year were mostly for small units under 60㎡. Small apartments have relatively lower price entry barriers and less loan interest burden. Especially, with Seoul and the metropolitan area being removed from regulated zones, the number of lottery-based units increased, raising the chances of winning for younger buyers with low scores, making it highly likely that many people in their 30s have jumped into the subscription market.