The Impact of the December 16 Ultra-Strict Regulations... Seoul Housing Market Expectations Hit Lowest in 10 Months

Housing Industry Research Institute January Housing Business Survey Index (HBSI) Announcement
Nationwide 75.7... Down 7.8p from Previous Month
"Regulations on Maintenance Projects, Sale Price Ceiling System, and Off-Season Overlap"

[Asia Economy Reporter Onyu Lim] The nationwide perception of the housing business market has significantly worsened following the '12·16 Measures,' which include ultra-strong real estate regulations. In particular, Seoul, where redevelopment regulations continue, recorded the lowest Housing Business Survey Index (HBSI) outlook in the past 10 months at 77.2. In contrast, Busan posted the highest nationwide figure of 115.7, buoyed by expectations following its recent removal from the adjusted target areas.

On the 8th, the Korea Housing Industry Research Institute announced that the nationwide HBSI outlook for January fell by 7.8 points from the previous month to 75.7. The HBSI is an index that comprehensively assesses the housing business market from the supplier (construction company) perspective, based on a survey of about 500 member companies affiliated with the Korea Housing Association and the Korea Housing Builders Association. A baseline of 100 separates positive and negative outlooks.

The January HBSI outlook mostly ranged between 60 and 70 across regions, indicating a nationwide expansion of negative perceptions toward the housing business market. Especially in Seoul, the index dropped 15.1 points from the previous month to 77.2, marking the lowest level in the past 10 months. Seoul’s HBSI outlook plummeted from the 90s in December last year to the 70s just one month later.

This decline is attributed to the ongoing regulatory stance on redevelopment projects, including increased mandatory rental housing ratios and sunset clauses, as well as the expansion of the price ceiling system to 18 districts in Seoul under the 12·16 Measures, compounded by the seasonal off-peak period. A representative from the Korea Housing Industry Research Institute stated, "With the recent government real estate policy announcements expanding the price ceiling system, the housing business market is expected to contract, especially in Seoul, parts of Gyeonggi Province, and the greater metropolitan area."

Ulsan also fell sharply by more than 20 points to 78.2 compared to the previous month, while Gwangju and Daejeon remained in the 80s at 80.6 and 87, respectively. Daegu maintained a level above 90 at 92.1. Conversely, Busan, despite a slight decrease of 4.8 points from the previous month, still recorded the highest nationwide figure at 115.7. This is interpreted as sustained market improvement expectations following its removal from the adjusted target areas.

Examining the HBSI outlook by factors reveals that the contraction of redevelopment and reconstruction projects lies at the heart of the negative perception of the housing business market. According to the Korea Housing Industry Research Institute, the order outlook for January dropped 9.5 points to 76.1 for redevelopment and fell 1.8 points to 82.7 for reconstruction compared to the previous month. The institute commented, "With the imminent sunset clause and the expansion of the price ceiling system, difficulties in promoting redevelopment projects, especially in Seoul, are increasing. It is necessary to establish differentiated business strategies and seek long-term response strategies to secure profitability."

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