June Apartment Pre-Sale Outlook Drops: "Market Sentiment Weakens"

June Nationwide Apartment Pre-sale Outlook Index Down 10.6 Points
Pre-sale Price Outlook Index Up 4.3 Points

The nationwide apartment pre-sale outlook index for June has declined. Market expectations for apartment pre-sales appear to have weakened overall, amid concerns over the accumulation of unsold units in regional areas and rising construction costs.

Apartment viewed from the observatory at 63 Square, Yeouido, Seoul. Photo by Yonhap News Agency

According to a survey conducted by the Housing Industry Research Institute among housing business operators on June 9, this month’s nationwide apartment pre-sale outlook index dropped 10.6 points to 69.4. The pre-sale outlook index quantifies the conditions of complexes that are about to be put on the market or are currently on sale, based on responses from housing business operators. An index above 100 indicates a positive outlook, while a reading below 100 signals the opposite.

The outlook index for the Seoul metropolitan area decreased by 1.3 points to 84.3, while the non-metropolitan regions saw a sharper decline of 12.6 points to 66.2. The forecast for Seoul remained unchanged from the previous month at 100.0. Incheon declined by 2.6 points to 72.4, and Gyeonggi Province fell by 1.2 points to 80.6, indicating a slight downward trend.

The Housing Industry Research Institute explained, “The fact that Seoul has maintained the benchmark level (100.0) for two consecutive months can be attributed to the ongoing increase in housing prices, which is driven by a lock-in effect on properties, the scarcity of new apartments due to supply shortages, and the shift in demand from lease to purchase amid a rental crisis. These factors have sustained expectations for the pre-sale market.”

The national average pre-sale outlook index, at 69.4 after a 10.6-point drop, remains significantly below the benchmark. The Institute further analyzed, “While the polarization between the metropolitan and non-metropolitan markets continues, business operators’ expectations for the pre-sale market have generally diminished due to several factors: the accumulation of unsold units mainly in regional areas, rising construction costs, and growing concerns over tighter financial regulations.”

The pre-sale price outlook index rose by 4.3 points from the previous month to 109.0, while the pre-sale volume outlook index increased by 9.5 points to 92.6. In contrast, the outlook index for unsold inventory dropped by 1.4 points to 98.6.

Regarding the outlook for pre-sale prices, the Institute explained, “The increase appears to reflect higher construction costs caused by rising prices of construction materials such as naphtha and asphalt concrete, amid prolonged supply chain instability due to the ongoing conflict between the United States and Iran.”

On the outlook for pre-sale volumes, the Institute commented, “Expectations for increased pre-sale supply have been driven by the resumption of previously delayed projects, particularly as housing prices continue to rise in the metropolitan area.” However, they also noted, “The ongoing decline in permitting and ground-breaking statistics continues to fuel concerns over insufficient housing supply.”

As for the decrease in the unsold inventory outlook index, the Institute analyzed, “The continued rise in home prices in the metropolitan area has led to the perception that prices for existing unsold units are relatively low, and there are expectations that some lease demand will shift to these unsold units as the rental crisis persists.”

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