Will Seoul’s Housing Price Gains Spread to the Provinces?... Soaring Expectations [Real Estate A to Z]

February Provincial Housing Business Sentiment Index Up 16.0P
Increase 4.1P Larger Than in the Seoul Metropolitan Area
Provincial Apartment Sale Prices Also on the Rise

Seoul cityscape. Yonhap News

While housing price increases have slowed in Seoul and the greater metropolitan area, the provincial real estate market is gradually recovering. It has also been confirmed that housing developers' outlook on the provincial real estate market has improved significantly.

According to a survey conducted by the Housing Industry Research Institute of housing developers, the February Housing Business Sentiment Index for non-metropolitan areas is projected to be 93.3, up 16.0 points from the previous month. Although this figure is still below the baseline of 100, which indicates an expectation that housing business conditions will improve, the increase was 4.1 points larger than that of the metropolitan area, which rose 11.9 points over the same period.

Among non-metropolitan areas, the broad metropolitan cities are forecast to rise 10.2 points to 99.1. Gwangju recorded 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 fell 8.1 points to 87.5.

Provincial regions are also projected to rise 20.3 points to 89.0. All regions posted gains, 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, "As housing prices in the Seoul metropolitan area have continued to rise recently, this upward momentum appears to have spread to major provincial cities and surrounding areas, reflecting expectations that housing business conditions will improve," adding, "In Ulsan, improving end-user demand driven by a recovery in key industries has led to increases in both transactions and prices, while in Sejong, policy expectations related to the relocation of the administrative capital have played a role, resulting in a clear improvement in business sentiment in both regions."

The February Apartment Pre-sale Outlook Index for provincial areas also climbed 18.0 points to 96.6, a larger increase than Seoul's 14.8-point rise. The Pre-sale Outlook Index is an indicator that quantifies the conditions of complexes that are about to be offered for sale or are currently on sale, based on a survey of housing developers. A reading above 100 indicates a positive outlook for pre-sales.

In non-metropolitan areas, South Jeolla rose 32.3 points to 92.3. Sejong also climbed 28.5 points, while Gangwon rose 28.1 points, Jeju 25.9 points, and Gwangju 23.6 points.

Apartment sale prices in provincial areas are also on an upward trend. This contrasts with Seoul, where the rate of increase in apartment sale prices has narrowed for two consecutive weeks as the end of the temporary suspension of the heavy capital gains tax on multi-homeowners approaches, prompting some owners to lower their asking prices to reduce their tax burden.

According to data from the Korea Real Estate Board, the week-on-week change in the Apartment Sale Price Index for provincial areas in the second week of February (as of February 9) was 0.03%, up 0.01 percentage point from the previous week. In Seoul, the change was 0.22%, with the rate of increase down 0.05 percentage point from the previous week.

During the same period, the weekly increase in the Apartment Jeonse (long-term rental deposit) Price Index for provincial areas was 0.06%, 0.01 percentage point higher than a week earlier. In Seoul, the figure was 0.11%, with the rate of increase narrowing by 0.02 percentage point from the previous week.