April Apartment Pre-Sale Outlook Plummets... Hit Hard by Middle East War and Real Estate Regulations

Lowest Point in Over Three Years
Nationwide Index Drops by 35.4 Points to 60.9 Compared to Previous Month

Seoul city view. Photo by Yonhap News Agency

The nationwide apartment pre-sale outlook index for April has seen a significant decline. It has dropped to its lowest level since January 2023, which appears to be due to concerns over an economic downturn triggered by the war between the United States and Iran, coupled with tighter lending regulations.

According to a survey conducted by the Housing Industry Research Institute targeting housing developers, this month’s nationwide apartment pre-sale outlook index was recorded at 60.9, down 35.4 points from the previous month. This is the lowest level since January 2023, when the index stood at 58.7. The pre-sale outlook index is a quantified indicator based on the survey of housing developers regarding the conditions of complexes that are about to be or are currently being offered for pre-sale. An index above 100 indicates a positive outlook for pre-sales, while an index below 100 indicates the opposite.

The outlook for the Seoul metropolitan area was 81.1, down 21.5 points. Seoul itself registered a decrease of 8.3 points to 97.1, while Incheon dropped 29.9 points to 66.7. Gyeonggi Province was recorded at 79.4, a decline of 26.5 points.

Outside the metropolitan area, the index fell by 38.4 points to 56.6. Both North Chungcheong Province and South Jeolla Province dropped by 50.0 points, marking the largest decreases. Ulsan was projected to fall by 45.9 points, Sejong by 42.9 points, Jeju by 42.2 points, and Busan by 39.6 points.

The Housing Industry Research Institute explained, "The sharp nationwide decline in the apartment pre-sale outlook index appears to be the result of a combination of domestic and international factors, including concerns over high interest rates and economic recession following the outbreak of the U.S.-Iran war on February 28, as well as the new administration's strengthened taxation and lending regulations for multi-home owners."

The institute added, "With international oil and commodity prices soaring and the won-dollar exchange rate exceeding 1,500 won, financial market instability is spreading. In addition, the upper limit of mortgage loan interest rates has surpassed 7%, increasing the interest burden, which has contributed to the contraction of the pre-sale market. Domestically, there is growing concern that the new administration will significantly strengthen property taxes, such as local and comprehensive real estate taxes, for multi-home owners after the local elections, and that lending regulations for multi-home owners will also be tightened. This sentiment has led developers to worry about a decline in future demand for new pre-sales."

The pre-sale price outlook index fell by 3.1 points to 104.5. The supply outlook index for new pre-sales dropped by 5.8 points to 89.7. The unsold inventory outlook index, after declining for three consecutive months, turned upward this month, rising by 7.3 points to 94.1.

The Housing Industry Research Institute stated, "Due to the war, the upward trend in import construction material prices is accelerating. In particular, the price of naphtha surged by about 35% within a month due to shortages, which is increasing price pressures for construction materials such as paint and windows. As a result, the upward trend in pre-sale prices is expected to continue."

The institute further commented, "Deterioration in developers' credit conditions has greatly reduced their capacity for new pre-sales, and demand for new pre-sales has also contracted due to heavier taxes and tighter lending regulations for multi-home owners. Concerns over a possible economic downturn and further interest rate hikes related to the U.S.-Iran war, together with the risk of heavier taxation for multi-home owners, have all contributed to heightened concerns about an increase in unsold inventory."

This content was produced with the assistance of AI translation services.