While housing supply is nationwide, applicants are flocking to Seoul. The era when the name 'metropolitan area' guaranteed real estate investment appeal is over, especially for regions outside the capital.
In the first half of this year, there were 283,619 first-round applicants nationwide, with 128,137 from Seoul, accounting for 45.2% of the total. However, the supply did not keep pace, with less than 4% of the demand being met. The average competition ratio for first-round applications in Seoul reached 63.56 to 1.
In contrast, Gyeonggi Province saw more than seven times the general supply compared to Seoul, yet only 29,335 applicants participated, resulting in an average competition ratio of 1.88 to 1. In Incheon, which performed relatively well, 30,978 people applied for 4,436 units, yielding a ratio of 8.11 to 1, but still far behind Seoul.
The indicators from the subscription market are straightforward: people are waiting to buy homes they want. More precisely, they are looking for homes they believe will appreciate in value, where they can sell when needed, and that are convenient for raising children or commuting.
Thus, the subscription market reflects not just a supply shortage but a mismatch between supply and demand. There is a lack of supply in Seoul, while demand is low in the outskirts of Gyeonggi and other regions. This is why even with increased nationwide supply numbers, subscription accounts remain inactive.
In the past, the term 'metropolitan area' served as a sort of guarantee. Areas in Gyeonggi, even if not in Seoul, attracted demand due to their proximity. The promise of future value was conveyed through regional transportation networks, new towns, and land development. However, that is no longer the case. Rising construction costs, high sale prices, lending restrictions, and interest burdens have made applicants more calculative. They prioritize financing possibilities over winning chances and consider whether prices can hold after moving in.
The concentration of applications is also evident in the size of units. In the first half of this year, 108,558 people applied for first-round subscriptions for new apartments with a standard size of 84 square meters, known as the 'national standard size.' This indicates that the market still desires medium-sized units suitable for families, but only when they are located in Seoul or key areas.
This leads to a dilemma in supply policy. To increase supply in Seoul, redevelopment and reconstruction must be expedited, but these projects progress slowly. Rising construction costs, increased member contributions, and difficulties in securing relocation and project financing complicate matters. Even after obtaining permits, the path to groundbreaking is lengthy. While supply in Seoul is necessary, the pace is lacking.
Conversely, increasing supply outside of Seoul can be relatively quicker. By designating new land districts, creating new towns, and prioritizing public land, significant numbers can be achieved. However, without accompanying jobs, transportation, schools, hospitals, and commercial areas, supply loses its appeal in the subscription market. Regions outside Seoul are already grappling with both unsold units and subscription shortfalls.
Applicants are acting rationally. If they must bear high sale prices, they prefer to choose locations where prices can be defended. As lending restrictions tighten, options become more limited. Cash-strapped genuine buyers are eliminated, while those with financial capacity gravitate toward safer investments in Seoul. Consequently, subscriptions have shifted from being a means of housing access to a strategy for asset protection.
A critical point often overlooked by the government when discussing supply is that while total supply is important, it alone cannot persuade the market. Supply that applicants ignore becomes unsold units, which then burden construction companies and financial institutions. Conversely, when supply in Seoul is insufficient, competition ratios soar, and the scarcity of new constructions increases. This cycle of regional polarization in the subscription market continues.
The controversy surrounding the third new towns and advance subscriptions reflects the same issue. The government aimed to showcase future supply, but if the actual move-in timeline extends, waiting becomes costly. If estimated sale prices diverge from confirmed prices, winners are left with uncertainty rather than opportunity. For supply signals to become hopeful for genuine buyers, both timelines and prices must be managed together.
Once again, the subscription market is questioning the supply policy: Is it supply to fill numbers, or supply that meets people's needs?
* This article has been translated by AI.
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