Housing Business Sentiment Index Rises for Third Consecutive Month... Financing Conditions Worsen

Thanks to the relaxation of real estate regulations, the Housing Business Sentiment Index has risen for three consecutive months this month. On the other hand, the financing index deteriorated, indicating that the financial pressure on housing construction companies is gradually intensifying.

According to the Korea Housing Institute (KHI) on the 18th, a survey on the perceived business conditions of housing construction was conducted targeting members of the Korea Housing Association and the Korea Housing Builders Association. The nationwide Housing Business Sentiment Index for this month was 81.5, up 8.4 points from the previous month. This marks the third consecutive month of increase following March (73.1).

The continued improvement in housing business sentiment is attributed to the government's proactive real estate market soft-landing measures since the end of last year and the recent reduction in loan interest rates by financial institutions, which have led to an increase in housing transactions since February. However, KHI explained that although the Housing Business Sentiment Index has been on a general recovery trend since early this year, the index remains at 81.5, below 100, making it difficult to consider this a full-fledged recovery phase in the housing business market.

By region, despite the nationwide upward trend, only Seoul's business outlook declined. Seoul recorded 78.0, down 10.2 points from the previous month (88.2). This is believed to be a correction following the sharp rise in Seoul's outlook index in March (24.2 points, the highest increase in March), as actual market changes did not materialize. Incheon and Gyeonggi rose by 2.8 points (63.8→66.6) and 7.2 points (71.1→78.3), respectively. The housing business sentiment index in other provinces increased by an average of 10.2 points (72.8→83.0). Notably, Sejong rose sharply by 23.9 points (68.4→92.3), Gangwon by 20.8 points (69.2→90.0), Ulsan by 16.9 points (63.1→80.0), and Busan by 15.1 points (68.9→84.0).

[Image courtesy of Housing Industry Research Institute]

On the other hand, the financing index fell by 11.9 points from 78.5 to 66.6. KHI analyzed, “Since the end of last year, the government has been actively implementing measures to ease real estate financial tightening, such as expanding financial support and project financing (PF) loan guarantees for housing construction projects, and extending PF loans through a consortium agreement led by the Financial Services Commission. Nevertheless, as the housing market slump continues, the financial pressure on housing construction companies is gradually intensifying due to unsold inventory accumulation and delays in project progress after land acquisition.”

KHI added, “Unless the housing market downturn reverses, the financial difficulties of housing construction companies are expected to worsen gradually. If this situation continues into the second half of the year, there is a high possibility of a chain bankruptcy among housing companies and financial sector insolvency. Therefore, in-depth individual management of projects related to housing construction companies, along with additional soft-landing measures such as tax incentives for purchasing unsold houses, appear necessary.”

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