With the Oct. 15 measures that grouped all of Seoul and 12 areas in Gyeonggi into regulated zones (adjustment target areas and overheated speculation districts) and land transaction permit zones, the business outlook of dwelling developers, which had contracted last month, appears to have improved significantly in just one month. Analysts say the shock from the regulations was smaller than expected, as sale prices continued to rise.
On the 16th, the Korea Housing Institute said that in a survey of dwelling developers conducted from the 18th to the 28th of last month, the December Seoul metropolitan area dwelling business outlook index came in at 84.5, up 20.4 points from the previous month. It rebounded after plunging from 95.1 in October to 64.1 last month.
Seoul (95.0) rose 23.3 points, Gyeonggi (79.4) rose 16.6 points, and Incheon (79.3) rose 21.7 points. When the dwelling business outlook index exceeds the baseline of 100, it means a greater share of firms view conditions optimistically; when it falls below 100, the opposite is true.
A Korea Housing Institute official said, "Although transaction volume itself has not yet clearly recovered due to strong loan regulations, designation of regulated areas, and the implementation of the land transaction permit system, dwelling sale prices have risen in key Seoul redevelopment complexes and popular areas such as Songpa, Dongjak, and Yeongdeungpo, improving developers' sentiment."
The institute added that a "balloon effect" in some parts of Incheon and Gyeonggi, which are non-regulated areas, also helped drive the index higher. The non-capital region index was projected at 72.5, up 6.2 points. The nationwide dwelling business outlook index came in at 74.7, up 8.8 points from the previous month.
The institute explained, "It is interpreted that the differentiation in recovery strength by region, as some demand that shifted after the designation of regulated areas in the capital region (under the Oct. 15 measures) flowed into major provincial cities, also contributed to the index's improvement."
This month, the nationwide funding procurement index (68.8) and the materials supply index (94.6) fell 4.6 points and 2.0 points, respectively, from the previous month. The decline in the funding procurement index is seen as reflecting a situation in which conditions for raising funds have worsened—commercial banks' nonperforming loan ratios for the construction sector are rising, and mutual finance institutions are also focusing on managing surging arrears—thereby adding to builders' burdens.
The drop in the materials supply index was analyzed as the result of increased import material cost burdens, as the won-dollar exchange rate has surged, hovering above the upper-1,470-won range recently.