Recently, macroeconomic uncertainties are having a significant impact on the Busan real estate market. The simultaneous occurrence of a global economic slowdown, tightening domestic financial conditions, and a decline in consumer sentiment is rapidly reducing the attractiveness of investment in real estate.
In particular, Busan faces a worsening structural stagnation due to the rise in unsold units and a liquidity crisis in the construction industry. This change is expected to have a significant impact on the market outlook going forward.
Real Estate Market Recession and Rise in Unsold Units
The Busan real estate market is currently experiencing a surge in unsold units. According to recently released data, the number of unsold apartments in Busan after completion has reached its highest level in 16 years, and in some areas, only a few units among the allocated ones are being contracted.
This is analyzed as a result of extremely depressed consumer sentiment combined with macroeconomic uncertainties. Investment demand is decreasing even in major urban areas of Busan such as Seo-gu, Dong-gu, and Jin-gu, and market participants are expressing concerns that unsold units will further increase. This situation is acting as a factor that makes recovery in the Busan real estate market difficult.
The increase in unsold units is beyond just a poor market atmosphere; it is having a serious impact on the entire real estate market.
If construction companies fail to sell, their financial structures worsen, making it difficult to promote new projects. This can lead to negative outcomes in the long-term aspects, such as urban regeneration or infrastructure improvements.
Investors hold the perception that it will take a long time for the market to recover and point out that recovering trust in the Busan real estate market will be challenging.
Earlier this year, there were forecasts that Busan's real estate market would continue its prolonged downturn throughout 2025, and based on this, we aim to analyze it comprehensively once again.
Limitations of Government Measures and Liquidity Crisis in the Construction Industry
The government is making various efforts to address the issue of unsold units, including purchases through the Korea Land and Housing Corporation (LH) and the launch of CR REITs. However, criticisms are emerging regarding the lack of direct demand stimulation measures, such as easing acquisition and capital gains taxes, which is preventing the rapid resolution of unsold units.
There are also analyses suggesting that the government's passive measures to alleviate unsold units in regional areas may be ineffective. This situation is likely to persist in the future.
The accumulation of unsold units is causing a liquidity crisis in the construction industry. As a result, cases of mid-sized construction companies headquartered in Busan entering legal management or corporate rehabilitation proceedings are increasing. Shin Taeyang Construction and Samjeong Corporation are examples.
The limited effectiveness of government policies and the liquidity shortage in the construction industry are placing a significant burden on the Busan real estate market.
Unlike the metropolitan area, regions tend to take longer to recover when capital flows drastically shrink.
Especially in the three districts of Gangnam in Seoul, apartment prices are rising by tens of millions, while in Busan's Haeundae or Suyeong-gu, there is a continuous decline of several hundred million compared to peak prices.
This situation is negatively impacting the Busan real estate market, raising concerns about future recovery.
Status and Outlook of Failed Redevelopment and Maintenance Projects
The redevelopment and maintenance projects in Busan are losing momentum recently due to issues with contractor failures. Major projects like the Dongnae-gu Myungjang 2 District, Busanjin-gu Gaya 4 District, Yeonje-gu Yeonsan 10 District, and Saha-gu Goejeong 8 District are sequentially failing to select contractors.
This issue is analyzed as a result of increased construction costs due to rising raw material prices and soaring labor costs, along with uncertainties in predicting investment demand, causing construction companies to be hesitant to promote projects. Therefore, to proceed normally with redevelopment projects in Busan, it is essential to address these issues.
Despite efforts to improve the city's image and enhance regional value through redevelopment and maintenance projects in Busan, recent failures have occurred. This situation implies delays in regional development and slow improvement in the housing environment.
As macroeconomic conditions worsen, it is becoming difficult to guarantee profitability in redevelopment projects. Consequently, the Busan real estate market is burdened with additional challenges due to consecutive failures.
Ultimately, these issues are negatively affecting the overall Busan real estate market, necessitating urgent solutions in the future.
Conclusion
The Busan real estate market is currently experiencing a complex crisis characterized by a surge in unsold units, failures in redevelopment and maintenance projects, and the risk of construction company bankruptcies.
In conjunction, uncertainties in the macroeconomy, a decline in consumer sentiment, and financial tightening are further depressing investment sentiment in the overall market. While the government and local governments are implementing various policies to restore regional real estate, criticisms are being raised regarding their inadequacy in generating fundamental demand.
Ultimately, it is expected that the Busan real estate market will require a considerable amount of time to overcome structural stagnation in both the short and long term.
This situation is likely to further widen the real estate gap between Seoul and the regions, and unless an effective solution to the Busan real estate crisis is found, it may face even more severe stagnation.
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