Real estate projects centering around regions with a sluggish market are seeing apartment construction projects under project financing (PF) being put up for sale. As construction costs soar and the apartment sales market also stagnates, there are increasing cases where housing construction projects are being sold midway without completion.
According to the PF business site information disclosure platform on the 18th, among the 369 PF business sites classified as troubled and currently being sold, 66 are apartment construction sites. This amounts to 18% of all business sites being put up for sale.
The minimum bid price for apartment business sites has been set at levels more than 50% lower than the appraisal value. An apartment construction site in Busan, which is in the pre-construction phase, has an appraisal value of 30.1944 billion won, but the minimum bid price is 16.972 billion won, which is 44% lower than the appraisal value. An apartment business site in Cheonan, South Chungcheong Province, has been determined to have a minimum bid price of 26.886 billion won, 52% lower than the appraisal value of 55.778 billion won.
The fact that even apartment business sites, which are evaluated as having relatively stable revenue compared to other PF businesses, are coming up for sale is due to the deterioration of business conditions caused by the recent downturn in the real estate market and rising construction costs. The prices of raw materials and labor have sharply increased, leading to a steep rise in construction costs. Even if businesses endure the skyrocketing construction costs, it is difficult to recover investments as sales do not materialize. Ultimately, as business viability deteriorates, business sites that could not transition from bridge loans to main PF are being offered at discounted prices in the market. Additionally, it has been reported that some projects have been decided for sale even after completing the construction of apartments due to unsold units. A bridge loan is a short-term loan that the initial developer of a project uses to finance land costs or other related permits.
According to the Ministry of Land, Infrastructure and Transport, as of January, there were 72,624 unsold dwellings nationwide, an increase of 8,869 from the previous year. The number of unsold units classified as 'maliciously unsold' has reached the highest level in 11 years. The volume of malicious unsold units stands at 22,872 nationwide. According to the real estate platform 'Zikbang,' the sales rate for apartments in February is only at 42%.
This phenomenon is particularly observed in the regions. Among the apartment construction business sites listed for sale, 80% are located in Daegu, Busan, Daejeon, Gwangju, and Ulsan. Business sites located in the metropolitan area account for only 20%. Daegu has the most unsold dwellings at 8,742, followed by Pyeongtaek in Gyeonggi Province (6,438), Busan (4,526), and Ulsan (3,943).
An industry source said, "Housing projects are considered relatively stable as they can recover construction costs even with a certain level of sales,” and noted, “However, in a situation where construction costs have surged and unsold units are increasing, it has become difficult for small developers to raise funds to continue projects.” The source added, "Ultimately, business sites that cannot pay the interest on bridge loans and cannot transition to main PF are coming up for sale in the market."