Real Estate Market Triple Burden: "Construction Companies Should Focus on Contracting Over Independent Projects"

Sangwoo Lee, CEO of Invade Investment Advisory
Seoul Sales Expected to Rise 2.4%, Jeonse 5.0%
"Demanders' Prejudice Against Products Deepens, Need to Adjust Sale Timing"

This year, the conditions for housing sales in the real estate market are expected to become more challenging, and consumers' biases toward products are likely to strengthen. Construction companies are facing a triple burden of real estate project financing (PF) crises, rising construction costs, and increasing sale prices, leading to opinions that they should focus on construction rather than their own development projects.

Sangwoo Lee, CEO of Invade Investment Advisory, is giving a lecture to construction company executives at the '2024 Housing Market Outlook' seminar hosted by the Housing Association on the 1st at the Construction Hall in Nonhyeon-dong, Gangnam-gu, Seoul.

On the 1st, at a seminar held by the Housing Association at the Construction Hall in Nonhyeon-dong, Gangnam-gu, Seoul, Lee Sang-woo, CEO of Invade Investment Advisory, gave a lecture on the topic of "2024 Housing Market Outlook."

CEO Lee forecasted that apartment sale prices in Seoul will rise by 2.4% and jeonse (long-term lease) prices by 5.0% this year. He explained, "Since household income growth is slow, assuming a 2.4% increase in Seoul apartment sale prices, transactions of apartments around 1 billion KRW will become more difficult. Pressure on jeonse price increases has emerged in Gyeonggi's Hanam, Hwaseong, Seongnam, and Gwangmyeong, and the upward trend in Seoul apartment jeonse prices is expected to be very strong. It will be especially harder to find jeonse in premium areas."

The polarization of the housing sales market between the metropolitan area and provinces is expected to deepen. This year, the total nationwide general housing supply is 155,308 units, about half of which are in the provinces. The supply is 15,233 units in Seoul, 64,630 units in the metropolitan area, and 75,445 units in the provinces. Recently, even within the metropolitan area, there are differences in demand depending on location and sale price, and in the provinces, the increase in unsold units has worsened sales conditions.

CEO Lee said, "Consumers are placing more importance on product quality and location, intensifying biases toward products. If the subscription competition rate in the provinces cannot reach 15:1 or higher, then sales should not proceed."

A significant portion of this year's housing supply in Seoul consists of officetels, small-scale remodeling complexes, and long-term unsold apartments are also about to be occupied. Namguro Station Dongil Centasia has conducted the 7th voluntary supply, and Hoban Summit Gaebong and Gangdong Jungang Heights City have proceeded up to the 3rd supply.

CEO Lee advised, "Consumers have clearly become more discerning, and construction companies need to actively promote when selling properties that have an advantage over competitors. Since it is difficult to handle unsold units once they occur, the timing of sales and product quality should be adjusted."

In redevelopment projects, conflicts over construction costs have led to contract terminations with construction companies or sudden increases in shared costs, causing many projects to be halted. CEO Lee advised that construction companies should adopt a strategy of focusing on construction contracts rather than self-developed projects.

He said, "Construction costs continue to rise, and delays in redevelopment projects are inevitable. Even mid-sized construction companies may find that focusing solely on 'construction' during difficult market conditions is the best approach. Instead of aggressively pursuing self-developed projects, they should consider specializing in construction."

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