Housing Industry Research Institute compiles August occupancy outlook index
Main cause of non-occupancy: failure to secure loan for balance payment at 38.5%
Due to the impact of the June 27 loan regulation, housing transactions have significantly decreased, leading to an increase in housing developers forecasting a negative outlook for the new apartment occupancy market.
On the 13th, according to a survey conducted by the Housing Industry Research Institute on housing developers, the national apartment occupancy outlook index for August recorded 75.7, dropping 20.1 points from July’s 95.8. An occupancy outlook index below 100 indicates that more developers have a negative view of the occupancy market, while a figure above 100 indicates more positive views.
By region, the index for the metropolitan area fell 41.0 points (from 117.1 to 76.1), metropolitan cities dropped 10.8 points (from 91.0 to 80.2), and provincial areas decreased by 19.3 points (from 91.5 to 72.2). The drop was more significant in the metropolitan area affected by the June 27 loan regulation.
The institute diagnosed that the combination of the existing DSR (Debt Service Ratio) application for unsold apartment balance loans and the June 27 loan regulations, which included a 600 million KRW limit on mortgage loans and the prohibition of using jeonse loans to cover the balance, resulted in problems with smooth move-ins. Concern over future real estate policy focusing on demand suppression has also contributed to the negative outlook among developers.
In the metropolitan area, Seoul saw a decline of 44.9 points (from 121.2 to 76.3), Incheon dropped 41.2 points (from 111.5 to 70.3), and Gyeonggi decreased 36.9 points (from 118.7 to 81.8). The institute analyzed the significant impact was particularly in the Seoul metropolitan area, where high-priced housing is concentrated, with a 70% drop in apartment sales transactions due to the June 27 loan regulation.
Among the five major metropolitan cities, Daejeon was the only city to record an increase, rising 4.1 points (from 87.5 to 91.6). Ulsan dropped 21.5 points (from 100.0 to 78.5), Daegu fell 15 points (from 95.0 to 80.0), Gwangju decreased 8.1 points (from 86.6 to 78.5), Busan dropped 6.5 points (from 84.2 to 77.7), and Sejong also decreased by 17.8 points (from 92.8 to 75.0). The increase in Daejeon’s index is attributed to some investment demand shifting to new supply apartments near the proposed Daejeon National Industrial Complex, as the housing market in Sejong declined due to delays in regional pledge implementation post-presidential election.
In provincial areas, Chungnam fell 30.0 points (from 100.0 to 70.0), Jeollabuk-do decreased by 27.3 points (from 100.0 to 72.7), Gyeongnam dropped 25.0 points (from 100.0 to 75.0), and Jeollanam-do fell 24.3 points (from 90.9 to 66.6), with negative outlooks also spreading in non-metropolitan regions. The housing industry is concerned that the June 27 loan regulation could lead to difficulties in securing funds for apartment occupancy, ultimately resulting in reduced private supply.
Meanwhile, the nationwide apartment occupancy rate in July was 63.9%, up 3.0 percentage points from June. By region, the metropolitan area saw a 2.6 percentage point rise (from 80.8% to 83.4%), the five major metropolitan cities increased by 7.0 percentage points (from 53.8% to 60.8%), and other regions rose by 0.1 percentage points (from 58.7% to 58.8%). In the metropolitan area, Seoul’s rate increased by 1.4 percentage points (from 87.7% to 89.1%), and the Incheon-Gyeonggi area rose by 3.3 percentage points (from 77.3% to 80.6%).
The main causes of non-occupancy were identified as the failure to secure a balance payment loan (38.5%), delays in selling existing homes (32.7%), failure to secure tenants (17.3%), and delays in selling ownership rights (1.9%). Notably, the issue of securing balance payment loans rose from 27.1% in July’s survey to 38.5%, surpassing delays in selling existing homes, which stood at 37.5% in the July survey.
A representative from the research institute commented, “The sudden rise in the proportion of failure to secure balance payment loans as a cause of non-occupancy has emerged as the biggest obstacle for residents.” They also noted, “The tightening of loan regulations is directly restricting the ability of those who have pre-purchased homes to move in. If the loan environment does not improve, we could see an increase in decision to abandon occupancy, leading to prolonged unsold inventory and liquidity issues for developers.” This indicates that additional financial and policy measures are needed to stabilize the housing market.