The Worst Real Estate Transaction Freeze Causes 'Groans' in Related Industries

[Image source=Yonhap News]

[Asia Economy Reporter Cha Wanyong] As the severe real estate market slump deepens the housing transaction cliff phenomenon, related industries such as brokerage and furniture are facing difficulties.

According to the Ministry of Land, Infrastructure and Transport on the 21st, the cumulative nationwide housing transaction volume from the beginning of this year to September was about 410,000 cases, which is half compared to the same period last year (818,948 cases). In particular, apartment sales in Seoul last month dropped by a staggering 77.9% to 856 cases. This is the lowest since related statistics began to be compiled in January 2006.

As real estate transactions reach a near standstill, the related industries are groaning. Especially, the number of real estate brokerage office closures is noticeably increasing.

According to the Korea Association of Realtors, in September, 918 brokerage offices opened nationwide, while 974 offices closed. Adding 84 offices that temporarily suspended operations, about 150 offices decreased. In August as well, more brokerage offices closed (994) than opened (906).

The number of brokerage office closures surpassing openings is the first time in three years since October 2019 (openings 1,207, closures 1,240). In 2020 and 2021, openings exceeded closures by more than 5,000 offices. However, since June this year, closures have outpaced openings mainly in metropolitan areas.

With the decline in housing transactions, the furniture industry is also taking a hit. Hanssem reported an operating loss of 13.6 billion KRW and a net loss of 8 billion KRW on a consolidated basis in the third quarter of this year, turning to a deficit. Sales during the same period were 477.3 billion KRW, down 10.9% compared to the same period last year. By business sector, home remodeling sales, which account for the largest share, decreased by 25.1% year-on-year to 158.6 billion KRW.

Hyundai Livart's operating profit on a consolidated basis in the third quarter of this year was 500 million KRW, plunging 87.3% compared to the same period last year. Net loss was 600 million KRW, down 81.8%. Shinsegae Casa also recorded an operating loss of 5.8 billion KRW in the third quarter due to the contraction of the home furnishing market. This is an increase of 4.7 billion KRW from the operating loss of 1.1 billion KRW in the same period last year.

The problem is that the negative factors surrounding the industry show no signs of being resolved anytime soon. As interest rates rise and the real estate market tightens, housing transaction volumes continue to decline.

According to data from the Korea Real Estate Board, as of the 18th, the nationwide apartment sales supply-demand index was 76.9, down from 78.5 the previous week, falling below 80 for two consecutive weeks. The sales supply-demand index is based on 100, and the lower it is, the more sellers there are compared to buyers.

Jeonse (long-term lease) prices are also falling. The nationwide apartment jeonse supply-demand index dropped from 80.4 to 78.4 this week, breaking below 80. In simple terms, this is the lowest in 10 years and 4 months since the Korea Real Estate Board began surveying the supply-demand index in July 2012.

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