High Initial Competition Rates but Frequent Contract Withdrawals After Winning
Dapsimni Artefore, Namguro Station Dongil Scentasia, etc.
62,000 Unsold Houses... Malignant Unsold Units Increasing Over 6 Months
Recently, due to the decline in housing prices, there have been numerous cases of people who had engaged in 'blind' non-priority subscription (jumjum) giving up on their subscriptions. As the market price around the sale complexes fell, making it difficult to gain profits from price differences, the number of people abandoning their subscriptions has increased. Despite construction companies' repeated rounds of sales, these units have not been absorbed, causing the nationwide unsold housing inventory to swell to a dangerous level.
That apartment contract that was once hot is now "well..."
According to Cheongyak Home on the 14th, the 3rd round of non-priority subscription for 8 units at Dapsimni Artefore started on the 13th. When the initial subscription took place in October last year, the special supply competition rate was 6.1 to 1, and the general supply competition rate was 100 to 1. Despite the high competition, subscribers did not sign the contracts, leading to the 3rd round of supply. The sale price for the 84㎡ exclusive area of this apartment is between 1,044 million KRW and 1,124 million KRW. The market evaluates that the sale price is about 100 million KRW higher than the actual transaction prices of nearby apartments.
At Namguro Station, Dongil Centasia will conduct the 9th voluntary supply starting from the 19th. Eight units with exclusive areas of 33 to 43㎡ will be supplied, with move-in scheduled for June. Although subscriptions started after the recruitment announcement in August 2022, some units remain unsold. A sales official requested in the recruitment announcement that "to avoid losing the chance to win due to 'blind subscriptions,' applications made with the intention of contract inability due to financial reasons or for subscription practice should be refrained from."
For Sangdo Prugio Clavenue, which is scheduled for move-in next month, the 3rd voluntary supply for 92 units was conducted on the 30th of last month after the initial subscription in September last year. However, unsold units have not yet been resolved. The sale price for the 84㎡ exclusive area ranges from 1,278.55 million KRW to 1,386.99 million KRW, which is evaluated to be 40 million to 150 million KRW higher than the actual transaction prices of surrounding apartments.
It is also known that double-digit unsold units remain at Imun I-Park Xi, which was sold in October last year. The non-priority subscription competition rate recorded 7 to 1.
Amid a surge of subscription cancellations, the number of unsold apartments nationwide, which had been declining since February last year, has turned to an upward trend after 10 months. According to the Ministry of Land, Infrastructure and Transport, the number of unsold houses nationwide in December last year was 62,489 units, an 8% increase from the previous month. As a result, the cumulative number of unsold units exceeded 60,000 after four months. The Ministry regards 62,000 unsold units as a dangerous level. The number of post-completion unsold units, known as malignant unsold, also increased for six consecutive months to 10,857 units. In the metropolitan area, unsold units increased by 43.3%. Busan and Daejeon also saw increases of 18.3% and 19.7%, respectively, showing a nationwide expansion trend.
Initial subscription enthusiasm still remains
This atmosphere in the subscription market is likely to continue. The initial sales rate of apartments is recovering compared to the previous quarter. According to the Housing and Urban Guarantee Corporation, as of the end of the 4th quarter last year, the initial sales rate of private apartments was 86.3%, up 2.8 percentage points from 83.5% in the previous quarter. The initial sales rate refers to the percentage of sales completed within 3 to 6 months after the start of sales. The initial sales rate of private apartments in the metropolitan area rose 6.0 percentage points to 94.7% compared to the previous quarter.
Researcher Kwon Joo-an of the Construction Policy Research Institute said, "Although the current market situation may not seem worrisome based on unsold inventory, we are at a turning point where the high-interest rate market conditions are prolonged, so more active demand support measures are needed. We need to convert jeonse (long-term lease) demand into purchase demand and increase purchase demand to allow the housing market to function normally."
Lee Sang-woo, CEO of Invade Investment Advisory, advised, "Consumers are increasingly emphasizing product quality and location, deepening their biases toward products. Since unsold units are difficult to handle once they occur, the timing of sales and product quality should be adjusted."
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