A survey by the Korea Housing & Urban Research Institute found that the August metropolitan area apartment pre-sale outlook index fell 14.0 points to 88.5. The decline was driven by increased funding burdens from interest rate hikes and stricter loan regulations including LTV tightening in some Gyeonggi areas and reduced mortgage limits at commercial banks. This marks a reversal from July, when all metropolitan regions saw month-over-month increases in pre-sale outlook indices.
Seoul, Incheon, Gyeonggi Record Double-Digit Index Declines
Seoul's index dropped 17 points to 97.3, Incheon fell 12.5 points to 80.6, and Gyeonggi declined 12.5 points to 87.5. The Korea Housing & Urban Research Institute attributed the drops to the interest rate hike implemented in July and signals of additional increases, which expanded funding burdens. The institute also cited LTV tightening following the designation of additional regulated areas in parts of Gyeonggi and reduced housing mortgage loan limits at commercial banks. Uncertainty from tax reform announcements and high pre-sale price burdens added to the negative sentiment.
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Apartment Pre-Sale Outlook Index Trend [Source: Korea Housing & Urban Research Institute]
The apartment pre-sale outlook index is based on surveys of housing businesses affiliated with the Korea Housing Association and the Korea Housing & Commercial Development Association. An index below 100 indicates negative market sentiment.
Non-Metropolitan Areas See 9.8-Point Index Rise on Semiconductor Cluster Plans
The non-metropolitan area apartment pre-sale outlook index rose 9.8 points to 94.2. Most regions recorded gains including Jeju (up 31.2 points), Gwangju (up 22.9 points), and North Gyeongsang (up 21.0 points). Busan (down 5.6 points), Daegu (down 3.5 points), and South Chungcheong (down 2.4 points) saw slight declines.
The institute analyzed that expectations grew following the announcement of large-scale semiconductor cluster development plans. The institute stated that regional positive factors including large-scale semiconductor clusters and data center development in Yeongnam and Honam regions, a supply shortage of new apartments causing a jeonse crisis, and discussions on comprehensive real estate tax reform focused on property value partially offset the burdens from tightened financial regulations.
National Index Rises 5.6 Points; Pre-Sale Price Outlook Climbs on Cost Pressures
The nationwide apartment pre-sale outlook index rose 5.6 points to 93.2. The August pre-sale price outlook index increased 2.9 points to 107.6, which the institute attributed to upward pressure on pre-sale prices from steep cost increases.
The pre-sale volume outlook index fell 5.7 points to 88.1, and the unsold inventory outlook index dropped 2.8 points to 91.0. The institute interpreted that uncertainty in the metropolitan subscription market from strengthened loan regulations led business operators to predict delays in pre-sale timing, which was reflected in the volume outlook index. While expectations for reduced unsold inventory emerged with the month-over-month decline in the unsold inventory outlook index, the institute added that resolving the backlog of unsold units will take considerable time.
FAQ
What caused the August metropolitan apartment pre-sale index to fall 14 points?
The decline was driven by interest rate hikes implemented in July, stricter LTV regulations in some Gyeonggi areas, reduced mortgage limits at commercial banks, and uncertainty from tax reform announcements.
Why did non-metropolitan areas see a 9.8-point rise in the pre-sale outlook index?
The Korea Housing & Urban Research Institute attributed the increase to large-scale semiconductor cluster and data center development plans in Yeongnam and Honam regions, a supply shortage of new apartments, and discussions on real estate tax reform.
