Pyeongtaek Management Area Is Just the Beginning, Over 20,000 Unsold Houses in the Seoul Metropolitan Area Nearing Breakthrough

- Unsold Housing in the Seoul Metropolitan Area Reaches 19,748 Units Early This Year, Surging More Than Tenfold in Four Years
- Urgent Need for Bold Financial and Tax Benefits, Including Eased Capital Gains and Acquisition Taxes and Loosened Loan Regulations in Outskirts of the Metropolitan Area

[Source: Ministry of Economy and Finance]

As the government unveils measures to supplement the construction market focusing on resolving unsold housing in local areas, forecasts suggest that the unsold housing stock across the Seoul metropolitan area will soon exceed 20,000 units. Pyeongtaek has been designated as a managed area for unsold housing for the first time in about five years, and particularly in Incheon, the situation is so severe that more than 50% of unsold units remain unsold even after completion, prompting urgent calls for countermeasures.

According to the Ministry of Land, Infrastructure and Transport, as of the end of January this year, the number of unsold houses in the Seoul metropolitan area reached 19,748 units. This level is comparable to the second half of 2016 when the real estate market was weak. Especially, once the number of unsold units rises, it tends to continue soaring until proper measures are implemented, raising concerns that the figure may soon surpass 20,000 units and possibly reach the previous record high of 36,903 units (December 2015).

There is already a widespread sense of crisis that unsold housing, centered on outskirts such as Pyeongtaek, could undermine the local economy. Accordingly, on the 7th, the Housing and Urban Guarantee Corporation (HUG) announced that Pyeongtaek has been newly designated as a managed area for unsold housing. While Pyeongtaek had only about 361 unsold units in January last year, this surged 18-fold to 6,438 units in January this year. Pyeongtaek accounts for 42.5% of all unsold housing in the Gyeonggi region.

HUG designates managed areas for unsold housing among cities, counties, and districts where the number of unsold units exceeds 1,000 and the ratio of unsold units to the stock of apartment housing is 2% or more. Areas with rapidly increasing unsold units, persistent unresolved unsold stock, or concerns about new unsold units emerging are targeted.

Being included in a managed area for unsold housing makes new sales more difficult. Developers face stricter HUG guarantee screenings, including pre-assessments before issuing sales guarantees, making it harder to secure funding. The intent is to limit new housing supply while clearing existing unsold units. Since additional supply becomes difficult immediately, places currently selling units get some relief.

◆ Steep Increase in Unsold Units... Seoul Metropolitan Area Likely to Surpass Previous Record

As unsold housing increases not only in Pyeongtaek but throughout the Seoul metropolitan area, there is an urgent call for countermeasures. Above all, the rapid pace of increase in unsold units is notable. Unsold housing in the metropolitan area hit a low of 1,183 units in August 2021 but has since steadily risen, making surpassing 20,000 units a matter of time. Particularly, unsold units after completion in the metropolitan area reached 4,446 units in January this year, accounting for 22.5% of the total. Incheon’s unsold units also reached 3,261 units in January, the highest since 2013.

This poses a significant risk of not only lowering the asset value of the housing complexes but also negatively impacting consumption and investment activities within the region. Given Incheon’s strategic location with excellent accessibility to the metropolitan area, if the unsold housing problem persists, it could adversely affect not only Incheon but also the real estate market and economic conditions of neighboring areas.

A real estate industry official said, “Incheon’s unsold housing issue reflects the instability of the entire metropolitan economy,” adding, “The financial burden on construction companies and the contraction of investment sentiment are intensifying, which could lead to concerns over non-performing loans in financial institutions.”

In this situation, the government and local governments must hasten the designation of managed areas for unsold housing and implement various countermeasures. There is growing support for comprehensive strategies to resolve oversupply, stabilize finance, and activate investment. The construction industry is already rife with crisis rumors for April.

Above all, analyses emphasize the urgent need for more drastic measures. There are concerns that hesitation could worsen the situation beyond control. In fact, in 2013, the government’s “April 1 Comprehensive Real Estate Measures” offered unprecedented benefits such as a full exemption from capital gains tax for five years, which proved highly effective. Easing regulations on LTV (Loan to Value) and DSR (Debt Service Ratio) to significantly lower loan barriers is also urgently needed. Following such bold measures, unsold housing, which peaked at 30,637 units in December 2015, decreased to a similar level as now?20,887 units in June 2016?and fell below 10,000 units by August 2017. Even with bold measures, it takes about 2 to 3 years to see actual effects.

An industry insider said, “If the government implements bold financial and tax support measures for the metropolitan area like the 2013 ‘April 1 Measures,’ it will play a decisive role not only in resolving unsold housing and normalizing the construction market but also in restoring real estate investment sentiment,” adding, “If recovery in the metropolitan area spreads to local regions, it will create a positive virtuous cycle throughout the economy.”

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