Frozen Housing Subscription Market... Capital Region Shortfall Rate Jumps 20 Times Compared to Last Year

21.3% Underperformance Rate from January to May
20 Times Higher Than Last Year's 0.9%
Subscription Competition Rate Also One-Third of Two Years Ago
Reflecting Borrowers' Selection Amid Strengthened Loan Regulations Like DSR

[Asia Economy Reporter Hwang Seoyul] The undersubscription rate for apartment applications in the Seoul metropolitan area, which was below 1% last year, has exceeded 20% this year. As loan regulations tighten and demand sorting intensifies, the popularity of the subscription market is cooling nationwide, signaling a red light for the subscription market.

According to data requested from Real Estate R114 on the 9th (as of the previous day), the proportion of undersubscribed units among general apartment supply in the metropolitan area from January to May this year was 21.3%, more than 20 times higher than the same period last year (0.9%). Looking at the monthly undersubscription rates, except for May (5.3%) and June (1.9%) last year, which recorded rates above 0%, the rate was 0% until December last year. However, it surged to 24.6% in January this year and reached 33.8% in March.

Looking nationwide, the subscription market performance is also sluggish. From January to May this year, 76% of the general apartment supply nationwide was fully subscribed. This is a 13.1 percentage point decrease compared to the same period last year (89.1%). The supply volume from January to May this year (57,357 households) was similar to that of the same period last year (57,044 households). In provincial areas, the subscription completion rate until May this year was 74.2%, down 8.6 percentage points from the same period last year (82.8%).

The cooling popularity in the sales market is also reflected in the competition rates. The subscription competition rate has been declining year by year. The average apartment subscription competition rate, which was 27.92 to 1 in 2020, recorded 19.79 to 1 last year and 12.11 to 1 this year (January to May). This year's competition rate in the metropolitan area was 13.86 to 1, about one-third of the 2020 rate (36.62 to 1), while the provincial rate was 10.94 to 1, about half of the 2020 rate (20.84 to 1).

The main cause of this phenomenon appears to be the strengthening of loan regulations. In particular, from January this year, the second phase of the Debt Service Ratio (DSR) was implemented, imposing individual DSR regulations on borrowers when taking out balance loans, raising the entry barrier. Currently, borrowers with total loans exceeding 200 million KRW are subject to a DSR of 40% for primary financial institutions and 50% for secondary financial institutions. From next month, the third phase of DSR will be implemented, applying individual DSR regulations to borrowers with total loans exceeding 100 million KRW.

The sorting phenomenon among subscription demanders is also reflected. Competition rates decline for complexes with poor locations or weak price competitiveness. Recently, the "Hanwha Forena Mia" in Gangbuk-gu, Seoul, which received non-priority subscriptions due to contract cancellations, was a complex not subject to the price ceiling system. Despite being supplied in Seoul, it closed with low competition rates in general supply. Especially for medium-sized units over 80㎡, the sale price exceeded 1 billion KRW, showing single-digit competition rates not only in general supply but also in non-priority subscriptions. An industry insider said, "For contract cancellation units of medium-sized apartments, the deposit required was over 100 million KRW, which was a significant financial burden."

This atmosphere is expected to continue for the time being. Yeokyunghee, senior researcher at Real Estate R114, said, "The current atmosphere will persist until improvements are made to the subscription system or the price ceiling system," adding, "Especially before improvements to the price ceiling system, private suppliers may adjust their supply timing." She added, "If, after system improvements, large complexes, locations, and brands preferred by demanders are released, it could lead to a turnaround in the subscription market atmosphere."

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