2023-12-29 16:40:00
Metropolitan area, double… “It’s even worse in rural areas.” Daegu-Daejeon increased by more than 10% in one month, and the number of construction companies that did not receive construction payments reached 302, including non-housing sites with financial difficulties.
A residential-commercial complex with 140 units in Hwagok-dong, Gangseo-gu, Seoul, completed at the end of last year. Although it has already been a year since construction was completed and occupancy began, 110 units remain unsold as of the end of October. This sparked a fire in the construction company. The construction company that built the building, ranked in the top 30 in contract rankings, is not receiving the 15% of the construction fee that was supposed to be received ‘upon completion of sale’. To resolve unsold units, unranked subscriptions were held 11 times over the course of a year, but in vain. This construction company, which had a surplus of 33.2 billion won last year, had a deficit (-374.39 million won) in the first to third quarters (January to September) of this year. An official in the construction industry said, “This is the case in Seoul as well, so the situation will be more serious in rural areas.”
As the number of unsold properties following completion, called ‘malicious unsold properties,’ increases, concerns regarding insolvency in real estate project financing (PF) also increase. Those who have received a unit must repay the PF loan they received from the financial sector with the money paid, but this flow has been blocked due to unsold units. Financial pressure on developers and construction companies is also increasing.
According to the ‘November housing statistics’ announced by the Ministry of Land, Infrastructure and Transport on the 29th, the number of ‘unsold units following completion’ as of the end of last month was 10,465. There was an increase of 241 units (2.4%) from the previous month’s 10,224 units. This is a 38.7% increase compared to the beginning of this year (7,546 homes). Unsold homes following completion literally refer to homes that have not been sold even following completion of construction and inspection for use. As these unsold units accumulate, PF site risks increase. In PF sites, the initial funds for the business, such as land purchase, are usually received from the financial sector as a bridge loan within one year of maturity, and then converted to a main PF loan as construction begins and sales begin. As the number of unsold units increases, it becomes difficult to repay this loan.
After completion, the number of unsold units in the metropolitan area reached 2,089, nearly doubling from 1,280 units in January. The local situation is also not good. As of the end of last month, the number of unsold homes outside the metropolitan area following completion reached 8,376. It increased by more than 30% compared to January this year (6,266 homes). In particular, Daegu (1,016 homes) and Daejeon (436 homes) surged by 12.5% and 16.0%, respectively, compared to the previous month.
The total number of unsold homes, including unsold homes that are not yet completed, was 57,925, down 0.6% (374 homes) from the previous month (58,299 homes). The overall decrease in unsold units was due to low housing sales themselves. An official in the sales industry said, “Apartment sales this year have decreased by 37% compared to last year, reaching the lowest level.” He added, “As the business environment has worsened, the number of construction companies giving up sales altogether is increasing.”
In fact, in the case of Daegu, the total number of unsold homes has decreased for nine consecutive months since March, but this is because Daegu City decided to withhold approval for new housing projects until the housing market stabilizes in January of this year. As no new units were released, some unsold units were digested. Starting in October, the number of unsold units following completion increased significantly once more as large complexes such as Bando Yubora Centum (1,678 units) and Suseong The Palace Purgio The Shop (1,299 units) in Seodaegu Station continued to move in.
Non-residential sites such as officetels and knowledge industry centers are also facing great difficulties. According to the Korea Industrial Location Agency, there are 302 sites across the country where construction has not begun even following receiving approval for the establishment of a knowledge industry center. Not being able to start construction means that you are holding on by paying interest on the bridge loan because you have taken out a bridge loan and have not been able to convert to main PF.
Kwon Dae-jung, a professor of real estate at Sogang University Graduate School, said, “The preference for non-apartments such as officetels and villas has plummeted due to lease fraud, and the sale price of the Knowledge Industry Center has also risen due to increased construction costs, but rental demand has decreased due to the economic downturn.” “Difficulties in the PF field are increasing, but there are no statistics, so it is difficult to understand the current situation,” he said.
Reporter Choi Dong-su firefly@donga.com
Reporter Jeong Soon-gu soon9@donga.com
1703888262
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