The outlook for the housing business improved in May as investment demand shifted to non-metropolitan areas due to stricter real estate regulations in the metropolitan region.
On May 19, a survey of housing developers revealed that the housing business outlook index rose by 13.9 points from the previous month to 77.6.
While the metropolitan area saw a decline of 5.3 points to 72.9, non-metropolitan areas experienced an increase of 18.0 points to 78.6.
In the metropolitan region, the index fell as follows: Gyeonggi Province dropped by 8.5 points (from 76.9 to 68.4), Seoul decreased by 5.3 points (from 87.8 to 82.5), and Incheon fell by 2.2 points (from 70.0 to 67.8). This decline is attributed to rising interest rates, concerns over tax and loan regulations, and increased construction costs.
As mortgage rates rise, the financial burden on buyers has increased, leading to a cautious market stance amid discussions on the end of the temporary suspension of capital gains tax for multiple homeowners and stricter taxation for non-resident homeowners.
Conversely, major cities in non-metropolitan areas all reported increases. Ulsan rose by 25.8 points (from 58.8 to 84.6), Daejeon by 25.5 points (from 61.1 to 86.6), Gwangju by 23.5 points (from 52.9 to 76.4), Daegu by 18.2 points (from 68.1 to 86.3), Sejong by 17.3 points (from 75.0 to 92.3), and Busan by 10.5 points (from 60.0 to 70.5).
In provincial areas, Chungbuk increased by 29.6 points (from 45.4 to 75.0), Gyeongnam by 29.4 points (from 61.5 to 90.9), Gangwon by 21.7 points (from 58.3 to 80.0), Jeonbuk by 20.3 points (from 61.5 to 81.8), Gyeongbuk by 18.0 points (from 66.6 to 84.6), Chungnam by 6.1 points (from 66.6 to 72.7), Jeju by 3.3 points (from 52.9 to 56.2), and Jeonnam by 2.5 points (from 60.0 to 62.5).
This shift in investment demand to non-metropolitan areas is analyzed as a response to the stricter regulations in the metropolitan region. Notably, the Ulsan and Gyeongnam areas benefited from strong performance in the shipbuilding and automotive industries, supporting local economic growth and housing demand. However, regions that experienced significant declines in the previous month showed substantial rebounds, indicating some base effect.
The national financing index for May is projected to rise by 6.9 points to 73.0, driven by growing expectations for a recovery in the housing market, particularly in non-metropolitan areas. The easing of financing conditions, including discounts on guarantee fees from the Korea Housing and Urban Guarantee Corporation (HUG) and extensions of project financing guarantees, is also cited as a contributing factor.
However, challenges remain, including rising interest rates, tightening project financing loans, and delays in recovering funds due to unsold inventory. The Korea Housing Institute noted, "This increase reflects a slight easing of psychological distress compared to the previous month."
The material supply index is projected to fall by 12.5 points to 67.1. This decline is attributed to increased concerns over procurement and construction costs due to the prolonged conflict in the Middle East, which has led to instability in oil and raw material prices.
A representative from the Korea Housing Institute stated, "The instability in oil and raw material prices due to the prolonged conflict in the Middle East is increasing construction cost burdens and negatively impacting business outlooks. However, there remains potential for housing prices in the metropolitan area to rise due to the influx of funds from the securities market and concerns over locked-up inventory."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.