Record High of Unsold Homes in Four Years – A Sign of Crisis in the Housing Market?

In August 2024, the number of unsold homes, known as “unsellable housing” that remain on the market even after completion, hit a four-year high, indicating a deepening downturn in the housing market.

In August 2024, the number of unsold homes, known as “unsellable housing” that remain on the market even after completion, hit a four-year high, indicating a deepening downturn in the housing market. With unsold housing in both metropolitan and regional areas, decreasing transaction volumes, and reduced housing supply, the future of the real estate market is at risk. This post will explore the causes behind the rise in unsellable homes, the current state of the housing market, and discuss future prospects.

As of August 2024, the number of unsold homes after completion, commonly referred to as “unsellable housing,” reached 16,461 units. This marks the highest level since September 2020, reflecting the accelerating slowdown of the housing market. While the total number of unsold homes decreased by 5.9%, unsellable homes increased by 2.6%, a worrying trend. The situation is particularly severe in regional areas, where unsellable housing rose by 3.8%, marking the 13th consecutive month of growth.

The Seoul metropolitan area is not immune to this trend either. The number of housing transactions in Seoul fell 14% from July to 10,992 units, and apartment transactions saw a sharper drop of 20.1%. This represents the first decline since December of last year. Nationally, housing transactions also decreased by 11.2%, signaling a significant slowdown in activity.

In terms of housing supply, key indicators like building permits are also showing weakness. The total number of permits issued nationwide in August stood at 28,478 units, down 12.3% year-on-year. Concerns about a future housing shortage are growing as cumulative permits for the first eight months of 2024 are down by 21.5% from the previous year. However, there are signs of improvement in housing starts, sales, and completions, which could signal a partial recovery.

Despite these signs, the increase in unsellable homes and the decrease in transaction volumes continue to reflect the overall market slump. The widening gap between metropolitan and regional housing markets, as shown in the divergent trends in housing sales, underscores the growing polarization. This is a factor that needs to be considered in future policy responses.

The record-high number of unsold homes in four years is more than just a statistic; it points to a deeper problem within the housing market. As transaction volumes decline and housing supply shrinks, the real estate market faces significant challenges in the coming years. It is crucial for the government to implement timely policies to restore balance between supply and demand. Addressing the regional disparities in the market will also be key to ensuring a broader recovery.