As government loan regulations have cooled transactions in the real estate market, third-quarter results in the furniture industry were sluggish. The securities sector expects that, following the Oct. 15 real estate measures and the resulting reduction in transactions of dwellings, the timing of a rebound in furniture industry results will also be delayed.
According to the Financial Supervisory Service's DART filing system on the 13th, Hanssem Co. disclosed that, on a consolidation basis, operating profit for the third quarter of this year was 6.8 billion won, down 6.1% from a year earlier. Revenue fell 2.8% to 441.4 billion won from last year, and it swung to a net loss, posting a 50 million won net loss. Hyundai LIVART's third-quarter operating profit was 3.7 billion won, down 61.7% on-year, with revenue of 340.7 billion won, down 25%. During the same period, Shinsegae Casa's third-quarter revenue fell 6.9% to 63.9 billion won, and it swung to an operating loss of 400 million won.
A shortage of move-in supply had existed before, but a string of government loan regulations cut off new transactions, dealing an additional blow. On June 27, the government announced household debt management measures limiting the mortgage loan limit to 600 million won. In succession, it lowered the loan-to-value (LTV) ratio in regulated area to 40%. This means borrowers can take out loans up to only 40% of a home's price. As these regulations made it harder for end users to raise funds, transaction volume plummeted. The furniture industry also failed to enjoy the peak moving season in the fall.
According to the Ministry of Land, Infrastructure and Transport's KOSIS "apartment housing pre-sale performance" data, nationwide apartment pre-sales from January to September this year totaled 133,09 households, down 19.5% from the same period last year (161,957 households). Also, according to the Seoul Real Estate Information Plaza, transactions of Seoul apartments fell about 65%, from 12,062 in June to 4,241 in July. A furniture industry official said, "Recently, there has been no moving demand, so orders for home furniture have been cut off entirely," and added, "Most volumes are going out as office furniture."
After the government implemented strong additional regulations on the 15th of last month, the fourth-quarter outlook for the furniture industry has also darkened. Under the measures, all of Seoul and 12 locations in Gyeonggi Province were designated as adjusted areas, overheated speculation zones, and land transaction permit zones (Toheo zones). LTVs in the designated areas were lowered to 40%. Transactions of pre-sale rights and move-in rights were also restricted.
Transactions of dwellings are decreasing. Real estate research firm RealToday analyzed Seoul apartment transaction records reported through the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system and found that during the 27 days from Oct. 16, the enforcement date of the Oct. 15 measures, to Nov. 11, the number of transactions was 2,320, down 77.4% from 10,254 in the previous 27 days (Sept. 18–Oct. 15).
In addition, rising raw material prices and the won-dollar exchange rate increased costs, worsening profitability in the furniture industry. The concentration of mid- to low-priced furniture consumption on online platforms such as Naver and Coupang also negatively affected the furniture industry's results.
Kim Sun-mi, an analyst at Shinhan Investment & Securities, said, "Even though the fourth quarter is a seasonal peak, Hanssem's revenue will be similar to the third quarter due to the impact of the long Chuseok holiday and the reduction in transactions of dwellings after the Oct. 15 measures." Kim added, "With reduced move-in supply, reduced transactions of dwellings, and diminished capacity for remodeling and furniture spending due to rising home prices, a delay in the furniture industry's earnings rebound is inevitable."