Seoul Apartment Move-In Outlook Falls in November; “Final-Payment Loan Burden Persists”

[Financial News] The nationwide apartment move-in outlook turned upward in November for the first time in four months, but the index fell in the Seoul metropolitan area, led by Seoul. The nationwide apartment occupancy rate, which reflects actual move-ins, also declined in October. Failure to secure a loan for the final payment was the most common reason for not moving in, showing that financing pressures persist.
According to the Housing Industry Research Institute on the 10th, the nationwide apartment move-in outlook index for November, based on a survey of housing developers, rose 2.7 points from the previous month to 85.3. This was close to the average of 85.8 over the past year. The index for the Seoul metropolitan area fell 8.6 points, from 98.2 to 89.6, while those for metropolitan cities and provincial areas each rose 5.0 points, from 86.6 to 91.6 and from 73.9 to 78.9, respectively. The gap between the Seoul metropolitan area and the rest of the country narrowed from 18.9 points the previous month to 5.3 points.
■ Seoul, Gyeonggi and Incheon all decline; Sejong at 115.3
Seoul’s index fell 14.1 points, from 108.3 to 94.2. Gyeonggi Province dropped 8.7 points, from 97.2 to 88.5, and Incheon fell 3.0 points, from 89.2 to 86.2.
The Housing Industry Research Institute said that in Seoul, apartment listings for sale had risen by about 30% since the tax reform plan was announced in early August, amid concerns over the burden of holding taxes, and that the pace of home-price increases had also slowed after 86 consecutive weeks of gains. The analysis was that the move-in outlook, which had risen sharply the previous month, was adjusted amid concerns about interest costs: although the Bank of Korea held its key interest rate last month, it left the door open to further increases after raising rates in July and August.
Among metropolitan cities, Busan rose 16.6 points, from 68.4 to 85.0, and Sejong City rose 15.3 points, from 100.0 to 115.3. Daejeon’s index increased from 81.2 to 88.2. The institute analyzed that expectations of demand flowing into Daejeon and Sejong City, following plans to relocate 44 central government agencies from the Seoul metropolitan area to Sejong City, were reflected in the readings.
■ Actual occupancy rate falls... share unable to secure final-payment loans hits a year-to-date high
The nationwide apartment occupancy rate in October was 65.0%, down 3.2 percentage points from the previous month. The rate in the Seoul metropolitan area rose from 79.8% to 81.2%.
Within the Seoul metropolitan area, Seoul’s rate rose from 84.8% to 87.6%, while the rate in the Incheon-Gyeonggi region increased from 77.3% to 78.1%. The institute analyzed that a shortage of jeonse listings and rising prices had somewhat improved conditions for moving into newly built apartments.
The most common reason for not moving in was failure to secure a loan for the final payment, at 45.8%. This was followed by delays in selling an existing home (25.0%), difficulty finding a tenant (12.5%), and delays in selling presale rights (2.1%). The share attributed to failure to secure a final-payment loan was the highest so far this year. The institute said lending conditions had become a bigger factor, with the Bank of Korea reporting that the mortgage rate in September was 4.88%, its highest level since 2012.
■ Fewer move-in units could ease the burden of finding tenants
About 11,000 apartments are expected to be ready for occupancy nationwide in November, down about 30% from the previous month and about 49% from the same month last year. The number in Seoul is expected to be just 488 units.
The institute analyzed that even as high mortgage rates limit individuals’ ability to secure financing, a decrease in the number of units available for move-in could ease the burden of finding tenants and give banks more room to provide final-payment loans.
The institute also said that external conditions were shifting, including a decline in long-term U.S. Treasury yields following the United States midterm elections, and that it would be worth monitoring how these changes affect the financing environment for buyers of presale apartments.
[email protected] Choi Ga-young Reporter