February Apartment Occupancy Outlook Index Rises 13.8 Points...Sharp Gain in Seoul Metropolitan Area [Real Estate A to Z]

The nationwide apartment occupancy outlook index for February recorded a double-digit increase. As apartment prices continued to rise and concerns over insufficient supply grew, this affected expectations for occupancy conditions, especially in the Seoul metropolitan area and Seoul itself.

Yonhap News Agency

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According to a survey of housing business operators conducted by the Housing Industry Research Institute on February 10, the nationwide apartment occupancy outlook index for February was 98.9, up 13.8 points (p) from the previous month (85.1). During the same period, the index for the Seoul metropolitan area rose 11.9p to 101.3, that for the five major metropolitan cities rose 12.7p to 103.9, and that for provincial regions rose 15.6p to 94.4. The occupancy outlook index is an indicator that projects whether buyers of pre-sale apartments will be able to pay the remaining balance and move in; a reading above 100 means the outlook is favorable.

After the implementation last year of the October 15 real estate measures, which contained strong lending regulations, the occupancy outlook index plunged. However, it is analyzed that the continued rise in apartment prices and the spread of concerns about supply shortages have recently improved expectations regarding occupancy conditions once again.

In Seoul, the occupancy outlook index rose from 100 to 107.6, an increase of 7.6p. Apartment prices in areas such as Gwanak, Dongjak, and Gangdong, where apartments priced under 1.5 billion won that are eligible for mortgage loans are concentrated, rose by more than 1%, helping the housing sales price index recover to its pre-October 15 measures level. The fact that these areas also have a concentration of new move-in supply generated by urban renewal projects is cited as another factor improving the occupancy outlook.

In Gyeonggi Province, the index also climbed from 87.5 to 100, up 12.5p. Price increases of more than 1% in areas within commuting distance to Seoul, such as Bundang in Seongnam, Gwangmyeong, and Suji in Yongin, drove the rise in the Seoul metropolitan area index. Incheon surged 15.7p to 96.4, marking a third consecutive month of increases since the announcement of the measures.

Among the five major metropolitan cities, Gwangju improved to 100, up 23.6p, followed by Sejong at 121.4 (up 21.4p), Daejeon at 106.2 (up 12.5p), Busan at 100 (up 10.0p), and Daegu at 95.8 (up 8.3p), in terms of the magnitude of the increase. In particular, in Daegu, it is interpreted that the index was pushed up by a sharp reduction in unsold apartment inventory after CR REITs purchased unsold units in bulk.

Among provincial regions, Jeju showed the largest improvement, jumping 28.2p to 88.2. Chungcheongbuk-do rose to 100 (up 23.3p), Chungcheongnam-do to 100 (up 23.1p), Gangwon to 90.9 (up 20.9p), Gyeongsangbuk-do to 100 (up 13.4p), Jeollanam-do to 90.9 (up 13.2p), and Jeollabuk-do to 92.3 (up 10.5p). In contrast, Gyeongsangnam-do fell 7.2p from the previous month to 92.8. It is analyzed that the burden of move-in was reflected, as the number of units scheduled for occupancy in the first quarter reached about 3,300 households.

However, the Housing Industry Research Institute added that there is a possibility of a decline in the index because the January 29 supply measures announced immediately after the survey did not fully meet market expectations. The institute analyzed, "As the supply expansion plan focused on utilizing idle and underutilized land in the Seoul metropolitan area, it did not sufficiently meet market expectations," and added, "There is a possibility that expectations for occupancy conditions will be adjusted, leading to a slight decline in the occupancy outlook."

Meanwhile, the nationwide apartment occupancy rate last month was 75%, up 13.8 percentage points from the previous month. This was mainly due to a significant improvement in the occupancy rate in the five major metropolitan cities (69.8%) and other regions (76%). In contrast, the occupancy rate in the Seoul metropolitan area fell 1 percentage point to 82.6%. While Incheon and Gyeonggi Province maintained a similar level to the previous month at 80.5%, Seoul dropped 2.9 percentage points to 86.9%.

The main reason for non-occupancy was delays in selling existing homes. In fact, the number of apartment transactions in Seoul in January decreased by about 32% compared to the previous month. A representative of the Housing Industry Research Institute said, "As the government measures are focused on managing demand and new supply in the Seoul metropolitan area, there continues to be a policy gap regarding unsold homes in non-metropolitan areas," and added, "We should be aware of the possibility that the recovery in occupancy rates will turn out to be only a temporary rebound."

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