Housing Market Slightly Declines in June... Financing Conditions Improve

The housing business outlook in June showed a slight decline compared to the previous month. On the other hand, thanks to the government's proactive response and the three consecutive freezes of the base interest rate, the financing index appears to be improving.

[Image source=Yonhap News]

According to the Korea Housing Institute (KHI) on the 16th, a survey on the perceived business conditions of housing construction was conducted among members of the Korea Housing Association and the Korea Housing Builders Association. The nationwide housing business outlook index for this month was 82.9, down 3.9 points from the previous month. This marks a slight decline after four consecutive months of increase from January to last month this year.

The metropolitan area showed a significant drop of 10.4 points (90.1→79.7) compared to the previous month. Seoul fell by 19.1 points (106.6→87.5), Incheon by 12.2 points (80.0→67.8), while Gyeonggi remained the same at 83.7 points. However, KHI noted that the decline in the metropolitan area's index appears to be a correction following the sharp rise in the previous month (Seoul up 28.6 points, Incheon up 13.4 points), and it is unlikely to lead to a continuous downward trend in the future.

The non-metropolitan area fell by 2.5 points (86.1→83.6). In particular, Ulsan experienced the largest drop nationwide, falling 20.9 points (87.5→66.6). This seems to reflect market risk factors due to an increase in unsold houses. KHI explained, "As of April, unsold houses in Ulsan increased about 11.4 times year-on-year (361 units → 4,125 units), and in May, about 3,000 housing units reached their move-in period simultaneously." They added, "As the housing supply materialized (increase in move-in volume) during the real estate market downturn, housing developers appear to perceive this as a risk factor for housing projects in the Ulsan area."

[Image courtesy of Housing Industry Research Institute]

The regions with the highest housing business outlook index in June were Sejong (100.0) and Chungbuk (100.0). In Sejong, housing prices have recently fallen the most during the market downturn, and the perception that housing prices have bottomed out seems to be spreading, leading to expectations of a future upward phase in housing prices.

Chungbuk's high index is attributed to sufficient housing demand due to large-scale industrial complexes in Cheongju City. In fact, looking at subscription competition rates from January to May this year, Chungbuk (27.93 to 1) ranked second highest among cities and provinces after Seoul (49.85 to 1). However, considering that Sejong and Chungbuk are still at the baseline level (100), it is necessary to closely monitor future market changes.

Contrary to the slight decline in the housing business outlook, the financing conditions for housing developers have improved. The financing index rose by 10.1 points from 60.6 to 70.7 in June. This appears to be due to the government's proactive response and the three consecutive freezes of the base interest rate, which raised expectations for improved financing conditions for housing developers, leading to the index increase. Recently, as part of the government's support policy for normalizing PF (Project Financing) sites, proactive new funding and maturity extensions were promoted for 19 projects through PF creditor consortium agreements.

KHI analyzed, "However, due to the overall decline in housing prices caused by the housing market downturn and rising construction costs, it remains difficult for construction companies to secure profitability. Financing issues caused by the financial sector's passive investment in PF projects are expected to continue until the economic recovery."

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