Rising Interest Rates and Tighter Regulations Worsen Housing Market Outlook for Seoul Metropolitan Developers

Apartment view in Seoul. Photo by Yonhap News Agency

Due to concerns over rising interest rates and the strengthening of tax and loan regulations, housing market outlook among residential developers in the Seoul metropolitan area has worsened.

According to a survey conducted by the Housing Industry Research Institute (HIRI) on residential developers, the Housing Business Sentiment Index for May was found to be 77.6, up by 13.9 points from the previous month. This index is based on a benchmark of 100: if the index is above 100, more developers expect the market to improve, while a figure below 100 indicates a majority expects worsening conditions.

For the Seoul metropolitan area, the index was 72.9, down by 5.3 points. Specifically, Gyeonggi Province posted a decline of 8.5 points to 68.4, Seoul dropped by 5.3 points to 82.5, and Incheon fell by 2.2 points to 67.8.

HIRI analyzed that the drop in the metropolitan area index was due to both the increased financial burden caused by higher mortgage loan interest rates, and the expansion of a wait-and-see attitude in the market due to the end of the temporary easing of the capital gains tax on multiple home owners and discussions on stricter taxation for non-resident single-home owners.

In addition, the prolonged war in the Middle East has led to volatility in oil and raw material prices, further raising construction costs and negatively impacting business outlook.

In non-metropolitan areas, the index rose by 18.0 points to 78.6. The figure for major cities increased by 20.0 points to 82.8, while provincial areas climbed by 16.3 points to 75.4. Among major cities, Ulsan rose by 25.8 points, Daejeon by 25.5 points, Gwangju by 23.5 points, Daegu by 18.2 points, and Sejong by 17.3 points. In provincial regions, North Chungcheong rose by 29.6 points, South Gyeongsang by 29.4 points, Gangwon by 21.7 points, North Jeolla by 20.3 points, and North Gyeongsang by 18.0 points, in order of improvement.

In the Busan-Ulsan-Gyeongnam (Bu-Ul-Gyeong) region, the strong performance of the shipbuilding and automobile industries in Ulsan and South Gyeongsang has had a positive effect on the regional economy and housing demand, with an increase in transactions leading to an improved outlook. However, since the rebound was most notable in areas where the rental index had fallen sharply, it appears that this rise is partly due to base effects, along with increased expectations for a recovery in local housing markets.

As expectations for a housing market recovery grow, particularly in non-metropolitan areas, the nationwide fund procurement index for this month is forecast at 73.0, up by 6.9 points from the previous month. Meanwhile, the material procurement index fell by 12.5 points to 67.1, amid growing concerns over material supply and construction cost burdens caused by the prolonged Middle East conflict.

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