Metropolitan Housing Business Outlook Slumps Amid Higher Rates, Sluggish Transactions; Non-Metro Areas "Rebound"

"Wait-and-see approach spreads among buyers in high-priced areas" in the metropolitan area
Large-scale investment in North Chungcheong's semiconductor industry
Impact of announcement on relocating additional central government agencies to Sejong

The outlook for the housing business in November diverged sharply between the Seoul metropolitan area and non-metropolitan regions. The outlook for the metropolitan area, including Seoul, fell sharply amid rising mortgage rates and sluggish transactions, while non-metropolitan regions rebounded on a recovery in transactions in some areas and positive development factors.

A view of Jongno and Seodaemun-gu from Namsan in Seoul. Yonhap News Agency

A survey of housing developers by the Housing Industry Research Institute on November 12 found that the Housing Business Outlook Index for this month stood at 92.1, up 5.7 points from the previous month. The index for the metropolitan area was projected to fall 14.4 points to 85.8, while that for non-metropolitan regions was projected to rise 10 points to 93.4.

The index is based on a benchmark of 100: a reading above 100 means more housing developers expect business conditions to improve, while a reading below 100 means more expect them to worsen.

In the metropolitan area, the index fell sharply by 23.2 points in Seoul and 16.7 points in Gyeonggi Province. Incheon saw a decline of 3.1 points.

The institute said, "The index for the metropolitan area fell significantly as rising interest rates increased the burden of purchasing homes and buyers in high-priced areas increasingly adopted a wait-and-see approach. Mortgage rates have risen for five consecutive months, while home sales in Seoul have declined and apartment prices have fallen in the three Gangnam districts, among other signs that price growth across Seoul has slowed." It added, "These market conditions have heightened uncertainty about future housing demand, negatively affecting developers' sentiment."

Most non-metropolitan regions were projected to see increases. North Jeolla Province led with a rise of 25 points, followed by South Jeolla Province with 21.8 points, Gangwon Province with 21.7 points, and North Chungcheong Province with 20 points.

In particular, North Jeolla Province, North Chungcheong Province, North Gyeongsang Province, Sejong, Ulsan, and Gwangju were above the benchmark of 100.

The institute explained, "The sharp rise in the index for non-metropolitan regions was due to a recovery in housing transactions in some areas and a decline in unsold homes, which somewhat eased concerns about a slump in the housing market. In particular, expectations of a boost to the local economy from large-scale investment in the semiconductor industry in North Chungcheong Province, the announcement of plans to relocate additional central government agencies to Sejong, and an expected increase in apartment sale prices in North Jeolla Province all had a positive effect on the outlook." However, it noted, "The differences in housing market conditions across regions remain significant, and the burden of homes remaining unsold after completion is still high, so it remains to be seen whether the recovery will spread."

The November Financing Index was projected to fall 11 points from the previous month to 69.8. The institute said, "Last month, expectations for improved financing conditions rose following financial support measures, including expanded project financing (PF) guarantees and reduced guarantee fees. However, the recent rise in corporate lending rates has increased financing costs and dampened developers' sentiment."

The Materials Supply and Demand Index was projected to rise 3.2 points to 98.3. The institute explained, "The Korean won-U.S. dollar exchange rate fell to the 1,320-won range last month, prompting expectations that the burden of imported raw material costs would ease. However, international oil prices remain volatile amid the prolonged war in the Middle East, and prices of key materials such as reinforcing bar remain high, so the burden of material procurement costs persists."

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