While the apartment presales market in the greater Seoul area, including Seoul and Gyeonggi, has cooled as borrowing thresholds have recently risen and dampened investor sentiment, expectations are reviving outside the capital region on the back of various development boosts such as semiconductor clusters and the effects of a shortage of new supply.
On the 6th, the Korea Housing Institute said this month's nationwide apartment presales outlook index for developers came in at 93.2, up 5.6 points from on the previous month. The index improved, but it still fell short of the baseline of 100, leading analysts to say it is hard to see it as a full market recovery.
The regional divergence was particularly notable. The greater Seoul area, which topped 100 on the previous month, fell 14.0 points to 88.5. Seoul plunged from 114.3 to 97.3, while Incheon and Gyeonggi each fell by 12.5 points.
The institute said, "With last month's rate hike and signals of further increases expanding financing burdens, tighter regulations such as stronger loan-to-value (LTV) ratios due to additional designation of some regulated areas in Gyeonggi and reduced mortgage loan limits at commercial banks are expected to worsen conditions for raising presale payments."
It added, "On top of this, uncertainty from the tax reform plan announcement and the burden of high presale prices appear to have weakened developers' expectations for the greater Seoul presales market."
By contrast, the non-capital region index rebounded 9.8 points to 94.2. Jeju jumped 31.2 points to 100.0, and most areas, including Gwangju (111.1), North Gyeongsang (106.7), and South Jeolla (88.9), were on an upward trend.
The institute said, "Large-scale semiconductor clusters and data center developments in Yeongho-nam, a rental crunch caused by a cliff in new apartment supply, and discussions on a 'value-centered' reform of the comprehensive real estate tax appear to have partly offset the burden from tighter financial regulations through region-specific positives and market conditions," adding, "Expectations for a balloon effect from tighter lending regulations in the greater Seoul area and for support measures for unsold units have grown."
Presale prices are expected to continue rising due to higher construction costs. The August presale price index rose 2.9 points from the previous month to 107.6. Reflecting the surge in raw material costs, the government has raised the standard construction cost, keeping upward pressure on supply prices.
Supply volume and unsold inventory both trended downward. The presale volume index fell 5.7 points to 88.1 due to the seasonal off-peak period and uncertainty in the subscription market. The unsold index also fell to 91.0 on expectations for local support measures, but the drop was limited, suggesting it will take considerable time to clear the backlog of unsold units.