Seoul Apartment Presale Outlook Turns Gloomy Again as Interest Rates and Loan Burdens Dampen Optimism

[The Financial News] Seoul’s apartment presale outlook index has fallen below the benchmark again after a month. The decline was attributed to weaker sentiment among housing developers amid continued funding pressures from rising lending rates and loan regulations.
The Housing Industry Research Institute said on the 5th that the November apartment presale outlook index for Seoul fell 14.3 points to 91.4, from 105.7 the previous month. It had risen above the benchmark of 100 last month for the first time in three months, but the upward trend did not continue.
The index measures housing developers’ expectations for conditions in the presale market. A reading below 100 means more respondents expect conditions to worsen from the previous month than expect them to improve. The survey was conducted from the 19th to the 27th of last month among member companies of the Korea Housing Association and the Korea Housing Builders Association.
The capital-region index fell 5.0 points, from 92.0 to 87.0. Gyeonggi dropped 1.1 points, from 86.8 to 85.7, while Incheon rose 0.6 points, from 83.3 to 83.9. The nationwide index fell 1.0 point to 81.3, marking its third consecutive monthly decline.
The Housing Industry Research Institute cited rising lending rates, the burden of home-buying costs and weak resale prices in the Gangnam area as factors weighing on Seoul’s outlook. Seoul apartment resale prices rose 0.09% in the fourth week of October, but the pace of increase slowed for a second consecutive week. Jeonse prices rose 0.17% that same week, while apartment transactions in September totaled 3,915, down 14.7% from the previous month.
The index for regions outside the capital area fell 0.2 points from the previous month to 80.0. Sejong, however, rose 22.1 points to 115.4, reflecting expectations of increased housing demand following the additional relocation of central government agencies. It was the only region nationwide to exceed the benchmark.
While the outlook for the presale market weakened, expectations of price increases remained predominant. The November presale price outlook index stood at 112.1, down 2.2 points from the previous month but still above the benchmark. The institute attributed this to continued pressure from construction costs, including labor costs.
The presale volume outlook index fell 6.2 points, from 97.1 to 90.9. By contrast, the outlook index for unsold homes rose 6.6 points, from 108.6 to 115.2, heightening concerns about an increase in unsold inventory.
The Housing Industry Research Institute expects the course of the presale market to be affected by the Bank of Korea’s base-rate decision this month, discussions on tax reform bills and developments in the capital region’s jeonse and monthly rental markets.
[email protected] Choi Ga-young Reporter