Housing Business Outlook for February Improves Sharply...Price Gains Expected Centered on Seoul Metropolitan Area [Real Estate AtoZ]

February HBSI Up 15.3P
Business Outlook Improves in Gyeonggi, Incheon, Then Seoul
"Metropolitan Home Price Gains Spreading to Provincial Areas"

Apartments in downtown Seoul. Yonhap News

As housing sale prices in the Seoul metropolitan area, including Seoul, continue to rise, housing business operators' outlook on business conditions has improved significantly.

The Housing Industry Research Institute announced on the 12th that, based on a survey of housing business operators, the Housing Business Sentiment Index (HBSI) for February came in at 95.8, up 15.3 points from the previous month.

In the Seoul metropolitan area, the index was projected at 107.3, up 11.9 points, while non-metropolitan areas were projected at 93.3, up 16.0 points. When the index exceeds the baseline of 100, it means that more companies expect housing business conditions to improve rather than deteriorate.

In particular, within the metropolitan area, Gyeonggi Province recorded 109.0, up 16.5 points. It was followed by Incheon at 100.0, up 13.4 points, and Seoul at 113.0, up 5.7 points.

The Housing Industry Research Institute stated, "Since the October 15 measures last year, transaction volume in the Seoul metropolitan area, including Seoul, has declined and the contraction in transactions has continued, but the upward trend in sale prices has instead strengthened," adding, "However, the high-priced housing market in the Gangnam area, which had surged recently, has shifted to a wait-and-see mode due to tighter lending regulations and a sense of fatigue. In contrast, in areas such as Gwanak and Seongbuk, where the share of mid- to low-priced apartments is high, price increases have outpaced the Seoul average due to a balloon effect and buying by end-users chasing the market."

It went on to say, "Due to high housing prices in key areas of Seoul and loan regulations, demand is rapidly shifting to Incheon and Gyeonggi, accelerating the 'escape from Seoul' phenomenon," and, "As upward pressure on prices has expanded across the entire metropolitan area, business sentiment toward the housing market has also improved."

The institute added, "The government has recently made clear its intention to resume heavy capital gains tax on multi-homeowners, so it is necessary to take into account the market's volatility, such as the risk of a worsening supply shortage due to more properties being locked up, and the possibility of a surge in fire sales when the temporary relief from heavy taxation expires."

Among non-metropolitan areas, the index for major metropolitan cities was projected at 99.1, up 10.2 points. Gwangju saw the largest increase of 25.5 points, followed by Ulsan with 24.6 points, Daegu with 7.4 points, Sejong with 6.6 points, and Daejeon with 5.6 points. Busan, however, fell 8.1 points to 87.5.

The index for provincial areas was also projected at 89.0, up 20.3 points. All regions rose, with North Chungcheong up 27.3 points, Jeju up 21.7 points, South Gyeongsang up 21.5 points, and South Chungcheong up 20.9 points.

The Housing Industry Research Institute explained, "The improvement in business outlook in both the metropolitan area and the provinces appears to reflect expectations that business conditions in the housing sector will improve, as the continued rise in home prices in the metropolitan area has spread this upward momentum to major provincial cities and surrounding areas," adding, "In Ulsan, transactions and prices have risen due to improved end-user demand driven by a recovery in key industries, and in Sejong, policy expectations related to the relocation of the administrative capital have played a role. As a result, business sentiment has clearly improved in both regions."

Meanwhile, this month's nationwide financing index was projected at 83.3, down 5.7 points from the previous month, while the materials supply index was projected at 104.2, up 7.4 points.

The Housing Industry Research Institute reported that the financing index declined because conditions for raising project funds have worsened, as lending rates have recently risen and loan requirements have tightened even for interim payments on pre-sale apartments. The rise in the materials supply index was analyzed as reflecting expectations that import material prices will stabilize due to a somewhat more stable exchange rate, as well as the impact of falling prices stemming from weaker demand for ready-mixed concrete and cement.