Areas outside of Seoul see lots of empty residences

When bids for purchasing rights for the Anseong Kyungdong Merville apartment complex now under construction in Anseong, Gyeonggi, opened on Oct. 26 and 27, a rush was expected.

Prices were set only at 4 million won ($3,592) per 3.3 square meters (35.5 square feet), about 10 times cheaper than what most apartments get in the posh Gangnam neighborhoods.

But the rush never came. For the 317 units up for sale, not a single unit was sold. It was a blow to one long-held belief.

“The myth that winning buying rights of yet-to-be-built apartments will always yield a profit no longer applies in real estate markets outside Seoul,” said Shin Jung-seop, deputy director of the real estate investment team at Shinhan Bank. “If living conditions do not meet the demands of prospective buyers, even the real estate market in Seoul could see unsold apartments.”

Other warning signs are flashing in the regional real estate markets. As of September, there were 44,109 unsold apartments outside Seoul, up by 2,430 or 5.8 percent year-on-year. Of the 44,109 unsold units, 7,170 apartments are newly built.

As in Anseong, many parts of the country are seeing low demand for the buying rights of apartment developments being constructed. For the Koaroo apartment complex in the border city of Pocheon, Gyeonggi, not a single buyer submitted an application for the 254 apartment units up for sale. For Namyang Houten Apartment, which will be built in Gangjin, South Jeolla, the ratio of bidders to units was a dismal 0.04 to 1.

Real estate prices in areas outside Seoul have also been stagnant, with some regions such as the two Gyeongsang provinces seeing declines this year. While real estate prices in Seoul rose 2.65 percent from January through October - despite government measures announced in August to cool the market - eight provinces only saw a 0.2 percent increase in real estate prices over the same period.

And a veritable tsunami of new apartments are coming on the market post-construction in the coming months.

Over a three-month period from November to January, more than 138,000 new units will be put on the market nationwide, a 57 percent hike from the same period last year.

Nearly half of the new supplies, or 64,203 apartments, will be in areas outside Seoul. The massive supply of new apartments in a short period of time could lead to further erosion of prices in non-Seoul areas, analysts say.

“Local real estate markets are having a hard time with the exceptions of Busan, Sejong and Daegu,” said Kwon Dae-jung, a professor of real estate studies at Myongji University in Seoul.

BY KIM KI-HWAN, KANG JIN-KYU [kang.jinkyu@joongang.co.kr]