[Real Estate Investment] Good News from the Pre-sale Market... Will Warmth Spread to Resale?

Outlook for Improvement in Seoul Apartment Sales Market After Five Months
"Rise in Gangnam 3 Districts Spreads Across the Metropolitan Area"
Trading Prices Expected to Climb... Policy Uncertainty a Key Factor

View of apartments in Seocho-gu and Gangnam-gu as seen from near the Han River in Seoul. Photo by Yonhap News

There is a forecast that the apartment sales market will improve this month. This is a positive outlook that has emerged for the first time in five months amid an exponential decline in sales volume due to political instability since the beginning of this year. Following the sales market, the trading market is also expected to warm up with the arrival of the seasonal peak.

The Korea Housing Industry Research Institute announced on the 9th that the apartment sales outlook index for this month rose by an average of 11.1 points nationwide to 84.0 compared to the previous month, based on a survey of developers. This index is a numerical indicator ranging from 0.0 to 200.0, calculated by surveying housing developers about the conditions of complexes that are about to be sold or currently on sale. An index above 100.0 indicates a positive sales outlook, while below 100.0 indicates the opposite.

Sales Market Improvement Outlook

In particular, the sales market in the Seoul metropolitan area is expected to improve significantly. The metropolitan area index rose 26.3 points from 73.4 last month to 99.7 this month. Non-metropolitan areas also increased by 7.8 points from 72.8 to 80.6. Within the metropolitan area, Seoul's index jumped 22.6 points from 85.7 to 108.3. Gyeonggi and Incheon rose by 27.3 points and 28.8 points, respectively.

The Korea Housing Industry Research Institute explained, "The rise in housing prices, which began mainly in the Gangnam 3 districts following the lifting of land transaction permission zones, has spread to major areas in the metropolitan region. This is analyzed as a result of a combination of factors including the arrival of the spring moving season and expectations of interest rate cuts."

According to Real Estate R114, the volume of general sales in the first quarter of this year was 12,358 units, a decrease of more than 65% compared to the same period last year (35,215 units). This is the lowest since 2009 (5,682 units). Monthly supply was 5,947 units in January, 2,371 units in February, and 4,040 units in March. Although March saw a slight rebound, it was the lowest level since February 2023.

The sales price outlook index rose by 2.2 points. The Korea Housing Industry Research Institute explained that the rise in the sales price outlook index appears to be due to concerns that political uncertainties such as delays in the impeachment ruling and uncertainties caused by U.S. tariffs will trigger inflation and exchange rate increases, leading to higher prices for imported raw materials.

The sales volume outlook index is expected to increase by 9.0 points. The institute analyzed, "This seems to be due to the resumption of postponed sales timed with the spring moving season, following the decline in mortgage loan interest rates and partial easing of mortgage loan regulations." It added, "However, the sales volume outlook has remained negative, failing to exceed the baseline (100.0) for six consecutive months since November last year."

However, the unsold inventory outlook index dropped by 17.6 points. Regarding this, the institute said, "This appears to be influenced by optimistic expectations that the price surge in the Gangnam 3 districts will spread to surrounding areas and demand recovery due to eased local loan regulations," adding, "It is also affected by the Korea Land and Housing Corporation (LH) policy to purchase 3,000 unsold apartments after local completion starting this month and the significant decrease in sales volume this year."

However, Seoul City re-designated land transaction permission zones last month, so the impact of this needs to be observed. On the 24th of last month, the city expanded the land transaction permission zones to include the Gangnam 3 districts and Yongsan district, and on the 4th of this month, it re-designated redevelopment project areas in Apgujeong, Yeouido, Mokdong, and Seongsu as land transaction permission zones.

Trading Market Also Expected to 'Trend Upward'

Similar to the sales market, there is a strong forecast that apartment prices in the trading market will trend upward this month. In particular, price increases are expected in the Seoul area, with the upcoming presidential election in June and the uncertainty of real estate policies cited as factors contributing to the upward trend.

Kim Je-gyeong, director of Toomi Real Estate Consulting, explained, "Apartment prices continue to rise, especially in prime areas of Seoul. Due to difficulties in transactions and restrictions on gap investments in the Gangnam 3 districts and Yongsan district, which were re-designated as land transaction permission zones, demand has shifted to areas such as Mapo, Seongdong, and Gangdong districts, where price increases are also occurring."

He added, "There is also observed movement among those who want to purchase Seoul apartments in advance, as the Democratic Party, which is likely to win the presidential election, is expected to strengthen the 'smart one house' policy."

Yoon Soo-min, a real estate specialist at NH Nonghyup Bank, said, "There is a psychological factor that a favorable environment for the real estate market could be created due to interest rate cuts, so apartment trading and rental prices are expected to show a gradual upward trend this month," adding, "In Seoul, the ongoing issue of supply shortage is also a positive factor for price increases."