Apartment Occupancy Outlook Rises Nationwide: Negative Sentiment Eases Amid Supply Contraction [Real Estate AtoZ]

Seoul Up by 26.4 Points, Metropolitan Area Sees Gains
"Occupancy Outlook Improves in Most Regions"

Apartment complex in downtown Seoul. Photo by Yonhap News

The nationwide apartment occupancy outlook index rose this month. Despite loan regulations imposed by financial authorities, continued supply contraction has eased the previously negative outlook for apartment occupancy.

The Housing Industry Research Institute (HIRI) announced on the 11th that, based on a survey of housing businesses, the nationwide apartment occupancy outlook index for September was calculated at 82.0, up 6.3 points from the previous month. This index predicts whether people who have purchased apartments will be able to pay the final balance and move in as scheduled. A reading above 100 indicates that more respondents have a positive outlook on the occupancy market, while a reading below 100 suggests the opposite.

In the Seoul metropolitan area, the index rose in all regions, including Seoul. Seoul recorded a 26.4-point increase to 102.7, Incheon rose by 11.8 points to 82.1, and Gyeonggi Province increased by 6.4 points to 88.2.

HIRI explained, "Although occupancy difficulties persist due to the June 27 loan regulation, the negative outlook among housing businesses has eased somewhat as a result of continued supply contraction. While demand for new construction remains strong despite regulations, construction companies are increasingly postponing new project launches due to deteriorating business conditions."

The institute added, "Amid repeated serious accidents at construction sites and the passage of the Yellow Envelope Law, concerns over further reductions in new supply due to construction delays and rising costs have led to an improved outlook for standard apartment occupancy."

Although housing transactions have declined since the loan regulations were introduced, housing prices have remained stable and, in some regions, have even increased. As a result, the effect of suppressing housing demand has been limited, which has also contributed to a less negative outlook for occupancy.

Among major cities, Ulsan saw a 13.1-point increase, while Gwangju, Daegu, and Sejong rose by 7.2 points, 5.7 points, and 6.8 points, respectively. In contrast, Busan dropped by 16.6 points to 61.1, and Daejeon fell by 5.9 points to 85.7.

HIRI commented, "While the occupancy outlook, which had dropped sharply last month, improved in most regions, Busan and Daejeon continued to decline. This appears to be due to the ongoing supply of new units amid a backlog of unsold apartments."

Among provinces, Chungcheongnam-do rose by 21.6 points, Jeju by 10.7 points, and Chungcheongbuk-do by 8.4 points, with most regions seeing increases. However, Gangwon-do and Gyeongsangbuk-do decreased by 7.5 points and 1.8 points, respectively.

Meanwhile, last month’s nationwide apartment occupancy rate was 67.4%, up 3.5 percentage points from the previous month.

In the metropolitan area, however, Seoul fell by 2.3 percentage points, and Incheon and Gyeonggi Province dropped by 1.0 percentage point. Analysts attribute this to the significant impact of loan regulations in areas with a concentration of high-priced homes.

The main reasons for non-occupancy were delays in selling existing homes due to decreased housing transactions (34.6%), inability to secure final balance loans (30.8%), inability to find tenants (23.1%), and delays in selling pre-sale rights (5.8%). While the inability to secure balance loans remains a major factor, the share of transaction-related issues such as inability to find tenants (rising from 17.3% to 23.1%) and delays in selling existing homes (from 32.7% to 34.6%) has also increased.