Due to High Interest Rates and High Sale Prices... Subscription Competition Rate Drops from 19.8:1 to 7.7:1

Real Estate R114 Analysis of This Year's Subscription Market
"High Pre-sale Prices and Economic Downturn Next Year... Subscription Market Polarization Will Worsen"

[Asia Economy Reporter Kim Hyemin] This year's housing pre-sale market performance continued to show a sluggish trend, with both subscription competition rates and winning scores declining compared to the previous year. This is attributed to the decreased appeal of subscription due to high loan interest burdens, rising pre-sale prices, and further declines in house prices. In Seoul, where subscription success had been consistent, the initial 100% pre-sale rate record was broken, and in regions with oversupply and significant price drops, the risk of unsold units expanded. With the economy expected to worsen amid high interest rates and inflation, the pre-sale market next year is also likely to contract significantly.

According to Real Estate R114 on the 20th, the nationwide average apartment subscription competition rate this year was 7.7 to 1, less than half of last year's 19.8 to 1. By region, the rates were highest in Sejong (49.6 to 1), Busan (37.2 to 1), Incheon (16.1 to 1), and Daejeon (12.3 to 1). No region recorded triple-digit competition rates. Among 384 complexes offering general sales, 175 (45.6%) experienced undersubscription.

The average winning score of successful applicants also dropped significantly. From January to December 14 this year, the nationwide average winning score for private pre-sale apartments was 21 points, down 13 points from 34 points last year. Unlike last year, when perfect score (84 points) winners appeared in three complexes (Raemian One Bailey, Hillstate Chowol Station, Opo Xi D'V), this year the highest winning score was 79 points.

Real Estate R114 explained, "From this year, the early implementation of the Debt Service Ratio (DSR) stages 2 and 3, along with consecutive interest rate hikes, increased financial burdens such as loan costs, leading to a sharp decline in subscription demand," adding, "Whether mid-term loans were available also affected subscription results."

The nationwide average pre-sale price per 3.3㎡ this year was 15.1 million KRW, up 1.99 million KRW from 13.11 million KRW last year. Seoul had the highest price at 34.74 million KRW, followed by Jeju (22.4 million KRW), Daegu (18.79 million KRW), Ulsan (17.62 million KRW), and Busan (17.18 million KRW). In local areas where pre-sale price regulations were lifted as they were removed from the adjustment target areas, the year-on-year price increase was more pronounced. Gyeonggi Province, with many public pre-sale units, saw a relatively smaller increase to 15.36 million KRW. Sejong's price decreased to 11.87 million KRW from 12.64 million KRW last year.

This year's pre-sale volume nationwide was 396,216 units. Although below 100,000 units in the first to third quarters, 142,905 units were supplied in the fourth quarter. Construction companies, judging that supply could no longer be delayed amid concerns over economic downturn next year, pushed for year-end pre-sales. In Seoul, with large-scale complex pre-sales concentrated in the fourth quarter, 75% (20,899 units) of the total 27,964 units this year were supplied in the fourth quarter.

Next year, polarization is expected to intensify depending on pre-sale prices and locations. Real Estate R114 forecasted, "Although subscription regulations have been eased, due to high interest rates and high pre-sale prices increasing price burdens, buyers are expected to be cautious in using subscription savings accounts," adding, "The pre-sale market next year will show significant differences in subscription enthusiasm depending on price levels."

Additionally, whether mid-term loans are available for redevelopment projects may influence subscription success, and with private projects shrinking due to increased unsold unit risks, public-led projects are expected to be relatively more active. Yeokyunghee, Senior Researcher at Real Estate R114, advised, "Supply will focus on apartments by large construction companies with relatively smooth financing, or complexes offering favorable contract conditions to prevent unsold units are expected to increase," adding, "Buyers should actively utilize benefits but also carefully select properties considering their financial capacity and potential for value appreciation after moving in."

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