About a quarter of the nation's unsold units after completion, the so-called "toxic unsold units," were concentrated in Daegu and North Gyeongsang (TK). As the slump in the regional housing market drags on, construction companies based in Daegu and North Gyeongsang are turning to redevelopment and reconstruction projects in Seoul and the Seoul metropolitan area. Some firms are shifting the center of gravity of their business to the metropolitan area to the extent of stationing key executives in Seoul.
According to the construction industry on the 31st, HS Hwasung, the No. 1 builder in Daegu by construction capability assessment, currently stations its head of development (senior managing director level) in Seoul to oversee its urban renewal division. It also expanded its dedicated urban renewal staff to eight by additionally hiring experienced workers. As the slump in the Daegu dwellings market has prolonged, this is a move to increase the share of urban renewal projects in the metropolitan area.
Building on this, starting in 2024, HS Hwasung won the redevelopment project for Myeonmok Station District 2-5 in Seoul, followed by consecutive wins for the Myeonmokbon-dong District 5 and District 2 projects. The company said it is focusing its capabilities on Seoul, noting that it won the reconstruction projects for Jamwon Hansin Town and Sungsu-dong Shinsung Townhouse in the second half of last year.
A HS Hwasung official said, "In Daegu, new dwellings permits themselves have dropped sharply, making it difficult to grow on the local market alone," adding, "We recently hired a head of development from a major Seoul builder to strengthen our urban renewal organization centered on Seoul, and we plan to further expand the share of projects in Seoul going forward."
In fact, the scale of toxic unsold units in Daegu and North Gyeongsang is the highest in the country. According to the Ministry of Land, Infrastructure and Transport, as of the end of March this year, there were 30,429 unsold dwellings nationwide after completion. Of these, Daegu accounted for 4,050 units and North Gyeongsang 3,004 units, totaling 7,054 units for the two regions. That is 23.2% of the national volume. Looking only at toxic unsold units in non-metropolitan areas (26,003 units), the share rises to 27.1%.
Toxic unsold units are inventory that remains unsold even though construction is complete and occupancy is possible. It is cited as an indicator that signals a stronger market slump than simple unsold inventory. In particular, cases continue in which contracts are not signed despite various changes in terms, such as discounted sales, balance payment support, and free options.
Other Daegu-based builders are also moving to craft survival strategies. Seohan Engineering & Construction, the No. 2 regional builder, is expanding its business area to the Chungcheong region and the outskirts of the Seoul metropolitan area, while Taeyoung E&C is increasing the share of LH public projects and nonresidential institutional sector construction to respond to the burden of contingent liabilities from project financing (PF). HXD Hwasung Development is likewise seeking to expand orders for public projects and urban renewal projects in the metropolitan area, reducing its dependence on regional dwellings projects. Woobang of SM Group is also assessed to be maintaining a conservative management stance focusing on public works and orders outside the region.
As delays in recovering construction costs overlap with PF burdens, liquidity pressure is mounting on mid-sized regional builders. In fact, in January–February this year, 14 general contractors and 67 specialty contractors in the Daegu and North Gyeongsang regions were recorded as having closed down.
Still, some say the Daegu real estate market has already approached a bottoming phase. Song Won-bae, CEO of Daeyoung Ledeco and Bilsabu, said, "Daegu's unsold inventory fell from about 14,000 units in 2022 to below 5,000 units now," adding, "However, a significant portion of the remaining inventory consists of toxic unsold complexes with weak locational competitiveness, so market distortions persist."