76% of Buyers Say "Interest Rate Hike Impact... Unsold Apartments to Increase Next Year"

Appropriate Time to Purchase Within 2-3 Years
Unsold Housing Fear Spreads to 수도권
Increase in Unsold Units → Decline in Construction Companies' Profitability

[Asia Economy Reporter Kim Min-young] A survey revealed that more than 7 out of 10 real estate buyers expect unsold housing inventory to increase next year. With the ongoing trend of interest rate hikes and a deepening housing market slump, the downturn in the pre-sale market is expected to worsen. If unsold inventory accumulates alongside a sharp drop in housing prices, construction companies could face liquidity crises, raising concerns about their financial difficulties.

[Image source=Yonhap News]

On the 21st, real estate research firm Realtoday conducted the '2023 Pre-sale Market Buyer Perception Survey' from the 29th to 30th of last month via Open Survey, targeting 1,000 people nationwide aged 20 to 60. The results showed that 76% (760 respondents) believed unsold real estate would increase next year. Only 6.8% responded that unsold inventory would not increase.

Among those who predicted an increase in unsold inventory, 73% cited 'base interest rate hikes' as the reason. They believed that the cooling of buying sentiment due to rising interest rates would dampen subscription enthusiasm, leading to more unsold units next year. This was followed by supply volume (11.4%), high pre-sale prices (8.4%), and loan regulations (6.2%). Other reasons (0.9%) included low birth rates and economic recession.

When asked about the most influential factors in purchasing unsold apartments, location (39.9%) was the highest, followed by pre-sale price (39.2%), financial benefits such as interest-free interim payments or free balcony expansions (12.2%), and brand (4.2%).

Regarding the appropriate timing to purchase an apartment in the future, 25.3% of respondents chose 'within 2-3 years,' 22.1% said 'after 5 years,' and 21.4% answered 'within 1-2 years.' Notably, only 8.2% and 2.7% selected 'within 6 months to 1 year' and 'within 6 months,' respectively, totaling just 10.9%. This indicates that most people are reluctant to buy next year, suggesting that the pre-sale market slump will continue.

Recently, as buying sentiment has weakened, fears of unsold inventory have spread throughout the Seoul metropolitan area. The nationwide unsold housing units increased nearly threefold from 17,710 units at the end of last year to 47,217 units by the end of October this year. In the metropolitan area alone, the number surged fivefold from 1,509 units to 7,612 units during the same period.

With the combined effect of base interest rate hikes and housing market stagnation raising concerns about further price declines, subscription competition rates have plummeted. According to Real Estate R114, the average nationwide apartment subscription competition rate from January to November this year was 8.04 to 1, less than half of last year's 20.51 to 1 during the same period. The first-priority competition rate also dropped from 19.99 to 1 last year to 7.75 to 1 this year.

Kim Woon-chul, CEO of Realtoday, predicted, "Due to interest rate hikes and rising pre-sale prices, buyers are expected to be less active in the pre-sale market. Therefore, following this year, the pre-sale market will maintain a downward trend next year, and unsold inventory will also increase."

The increase in unsold inventory directly leads to reduced profitability, raising concerns about construction companies' financial difficulties. As unsold units grow, construction firms find it harder to recover funds, potentially causing liquidity crises. Recently, the construction industry has been deteriorating due to a combination of real estate market stagnation, funding market tightening triggered by Legoland, and interest rate hikes.

The Korea Construction Industry Research Institute (KICRI) announced on the 2nd that the Construction Business Survey Index (CBSI) for last month fell 2.9 points from the previous month to 52.5. This is the lowest level in 12 years and 3 months since August 2010 (50.1). A CBSI below the baseline (100) means that more companies view the construction market conditions as poor.

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