COVID-19 Impact on Real Estate Business Cooling... Various Indices Plummet to All-Time Lows

April Housing Business Survey Index and Pre-sale Market Survey Index Forecasts Hit Record Lows
Despite Spring Peak Season, Sales, Move-ins, and Financing Expected to Become More Difficult

[Asia Economy Reporter Onyu Lim] The novel coronavirus disease (COVID-19) crisis has engulfed the real estate market. Despite the spring peak season, the April Housing Business Survey Index (HSBI) and Housing Sales Survey Index (HSSI) outlooks recorded all-time lows. Due to the real economy downturn, difficulties are emerging not only in housing construction stages such as sales, completion, and move-in but also in financing.

◆ "Housing business conditions will worsen"…HSBI outlook hits all-time low= According to the Korea Housing Industry Research Institute on the 12th, the April HSBI outlook recorded 42.1. This figure dropped 8.9 points from the previous month, breaking below the 50-point threshold for the first time. Last month's HSBI actual figure fell 16.5 points from the previous month to 40.6. The institute explained, "As the impact of COVID-19 continues into the second month, the nationwide HSBI recorded the lowest outlook and actual figures since the survey began."

HSBI is an index that comprehensively assesses housing business conditions from the supplier's (construction companies') perspective. It surveys about 500 member companies affiliated with the Korea Housing Association and the Korea Housing Builders Association. If the outlook exceeds the baseline of 100, it means more construction companies expect the market to improve than those who do not; if it falls below 100, the opposite is true.

By region, the HSBI outlook fell below 60 in Seoul (59.6) and Ulsan (54.5), and remained in the 40s in Busan (42.8) and Daegu (44.7). Particularly, Daegu, the region most severely affected by COVID-19, recorded an HSBI actual figure of 27.0 last month, the lowest nationwide since the survey began.

Kim Deok-rye, head of the Housing Policy Research Office at the Korea Housing Industry Research Institute, said, "As the severe COVID-19 situation continues following last month, the overall economic situation is deteriorating, inevitably increasing uncertainty and risks in the housing supply market. It is expected to take a considerable amount of time to normalize the supply market."

Not only are there difficulties in housing construction stages such as sales, completion, and move-in, but macroeconomic risks and uncertainties about the real estate market are also expected to make financing conditions more challenging. This month's outlooks for material supply, financing, and labor supply were 74.7, 59.7, and 81.5, respectively. In particular, the financing outlook (59.7) dropped sharply by 16.3 points from the previous month, marking the lowest level in the past three years.

Regional Housing Sales Market Index Outlook

◆ "Sales market will worsen"…HSSI outlook hits all-time low= Despite the spring sales peak season, following the HSBI outlook, the HSSI outlook also recorded an all-time low in April. According to the Korea Housing Industry Research Institute, the April HSSI outlook was 52.2, down 14.5 points from the previous month. This is the first time since the survey began that the index fell to the 50-point level. Additionally, last month's HSSI actual figure dropped to 47.3, the first time it fell into the 40s since the survey started.

HSSI is an index that comprehensively assesses the sales conditions of apartment complexes that are about to be sold or currently on sale from the supplier's perspective. It is surveyed monthly among member companies of the Korea Housing Association and the Korea Housing Builders Association engaged in housing business. If HSSI exceeds 100, it indicates a positive sales outlook; below 100 indicates the opposite.

The institute explained, "As the severe COVID-19 situation continues, sales schedules have been disrupted, and uncertainties regarding future sales plans and promotional strategies have increased, strengthening the perception of a downturn in the sales market."

Among this month's outlooks, the highest nationwide (Seoul 66.6) fell significantly below the baseline of 60, with most regions showing the lowest levels in the 30s to 50s. Particularly, Daegu (51.3), which had led the local sales market, dropped 22.2 points from last month's outlook. Ulsan (42.1), which had shown signs of recovery due to regional economic expectations before the COVID-19 outbreak, fell 38.8 points from the previous month.

This month's sales volume outlook (73.4) and unsold inventory outlook (90.4) fell 11.3 points and 9.6 points, respectively, from the previous month.

However, there is a trend of subscription demand concentrating on some competitive complexes. Accordingly, some analyses suggest that the sales market is becoming polarized and localized. Kim said, "Although housing business operators' perception of the sales market is worsening, subscription demand continues to concentrate on some complexes with competitive location and pricing, causing overheating in subscriptions. The polarization and localization of the sales market are expected to intensify further."

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