Seoul Housing Permits and Starts Halved in January... Monthly Rentals Hit Record 66.8% [Real Estate AtoZ]

Toxic Unsold Inventory Nears 30,000 Units

In January this year, both housing permits and housing starts in Seoul plunged to less than half of the levels recorded in the same period a year earlier. The share of monthly rentals (including lump-sum deposit monthly rent and quasi-jeonse) in total lease transactions reached an all-time high.

According to the "January Housing Statistics" released by the Ministry of Land, Infrastructure and Transport on the 27th, the number of housing units permitted nationwide was 16,531, down 26.4% from a year earlier. In Seoul, permits fell 55.9% to 1,226 units, and in Incheon they plunged 92.9% to just 95 units. Apartment permits in Seoul totaled 13,702 units, down 32.3% year-on-year and 86.3% month-on-month.

In the same month, housing starts in Seoul dropped 63.7% year-on-year to 741 units. Nationwide housing starts (11,314 units) increased 11.2%, but this was driven by Gyeonggi Province (6,581 units), where large-scale housing site development projects pushed starts up by 269.1%.

View of Yeouido apartments from the 63 Building observatory. Photo by Kim Hyunmin

Nationwide housing completions fell 46.5% year-on-year to 22,340 units. Completions in non-capital regions (10,680 units) plunged 58.4%, driving the overall decline.

Typically, it takes 4 to 5 years from permitting and 2 to 3 years from groundbreaking for new homes to become available on the market. The number of units scheduled for occupancy in Seoul this year has already fallen to around 16,000, roughly half of last year's level. As these leading supply indicators continue to decline, concerns are growing that a shortage of new move-ins in 2028-2029 could become a reality.

As of the end of January, the nationwide number of unsold units stood at 66,576, virtually unchanged from the previous month. However, post-completion unsold units increased 3.2% (914 units) month-on-month to 29,555, putting the 30,000-unit mark within sight. Post-completion unsold units refer to apartments that remain unsold even after construction is completed and are often called "toxic unsold inventory." The share of such toxic unsold units in total unsold inventory rose to 44.4%.

Unsold units in the Seoul metropolitan area surged 12.6% month-on-month to 17,881. The main reason was that Incheon’s unsold inventory more than doubled (up 106.9%) in just one month, from 1,927 units to 3,987 units. Outside the capital region, post-completion unsold units exceeded 3,000 units each in Busan, South Gyeongsang Province, North Gyeongsang Province, and Daegu.

Nationwide January Housing Construction Results. Ministry of Land, Infrastructure and Transport

Nationwide purchase transactions (61,450 cases) fell 2.3% from the previous month, but apartment purchases in Seoul (5,945 cases) increased 22.0%. This is more than double the five-year average transaction volume for January. Demand appears to have rushed in ahead of the May 9 expiration of the temporary suspension of heavier capital gains tax on multi-homeowners.

Northern Seoul (up 20.4%) far outpaced southern Seoul (up 3.4%), as buying interest appears to have shifted from the three southern districts and Yongsan District, which are designated as land transaction permit zones, to more moderately priced apartments in northern Seoul.

Of the 253,410 jeonse and monthly rental transactions in January, the share of monthly rentals (including lump-sum deposit monthly rent and quasi-jeonse) hit a record high of 66.8%. Compared with January 2022 (45.6%), this is an increase of more than 20 percentage points in four years.

The government has announced a plan to start construction on 1.35 million housing units in the Seoul metropolitan area by 2030, but critics point out that it will take several years for these units to be ready for occupancy, making it far from sufficient to fill the immediate supply gap.

This content was produced with the assistance of AI translation services.