[비즈한국] “Ulsan’s real estate is heating up again.” This is the most frequently heard sentiment in the real estate industry lately. As the Ulsan property market records some of the highest growth rates in the country, maintaining an upward trend for seven consecutive weeks, a “Big Bang” in the shipbuilding industry is being anticipated. This is fueled by the $150 billion (approximately 208 trillion won) MASGA (Make American Shipbuilding Great Again) project, agreed upon at the recent South Korea-U.S. summit.
The transformation of Ulsan's apartment market is remarkable. As of the fourth week of August, the sales price index rose by 0.04% and the jeonse (long-term deposit rental) price index rose by 0.06%. Notably, the jeonse growth rate is the second highest in the nation, trailing only Sejong City (0.10%). In the sales market, it is also showing clear upward momentum, posting the second-highest growth rate in the country after Seoul (0.08%).
Looking at specific transaction examples, one can feel the "intense heat" of the Ulsan real estate market. A 185㎡ unit at Sinjeong Lotte Castle Kingdom in Sinjeong-dong, Nam-gu, sold for 1.53 billion won in July, setting a new record price, while a 133㎡ unit at Mugeo Lotte Castle in Mugeo-dong sold for 630 million won in November, an increase of 20 million won compared to the previous transaction. Ulsan Grand Park Hanshin The Hue is also being traded at its initial presale price of around 800 million won with no premium, demonstrating solid demand.
The structural background for Ulsan's real estate rise is clear: a supply shortage. The scheduled number of apartment completions in Ulsan this year is 5,653 units, but this will drop by more than half to 2,632 units next year. Even more serious is the outlook that the annual supply of new homes will plummet to around 1,000 units per year from 2026 onwards.
The situation regarding unsold homes is also improving dramatically. The number of unsold housing units in Ulsan fell by 24% from 4,131 in December last year to 3,140 in May this year. Post-completion unsold units stand at 889, which is half the average of the six major metropolitan cities (1,642 units).
The jeonse market is even more dramatic. The average jeonse-to-purchase price ratio over the past three months has reached 76.5%, which is 7.7 percentage points higher than the national average, exhibiting a classic “shortage of rental homes” phenomenon. With the proportion of apartment listings hovering around 5% and the proportion of jeonse listings recording 0-1%, a state of “complete inventory shortage” is unfolding.
There is another reason why Ulsan is receiving attention. It is because Ulsan is the central stage for the MASGA project. Home to over 580 shipbuilding companies, including HD Hyundai Heavy Industries329180, Ulsan is already seeing tangible results from the project.
HD Hyundai has achieved its first success in the U.S. Navy MRO (Maintenance, Repair, and Overhaul) market. As the Korean shipbuilding "Big 3" enters the $14.5 billion (approximately 20 trillion won) annual U.S. Navy MRO market in earnest, the order potential for Ulsan shipyards is estimated to reach 21 trillion won.
Hanwha Group's $5 billion investment in Philly Shipyard is also noteworthy. They plan to increase their shipbuilding capacity from the current level of 1-1.5 ships per year to 20, signifying the full-scale implementation of South Korea’s shipbuilding capabilities on U.S. soil.
The appeal of Ulsan real estate investment is also proven by the numbers. An analysis of gap investments shows that Ulsan recorded an average capital gain of 61 million won for investments made in 2015 and 53 million won for those in 2020. This corresponds to an average annual return of over 10%.
Even more surprising are cases of small-scale investments. An officetel in Dal-dong, Ulsan, is generating an annual profit of 4.8 million won (a 13% yield) on a 40 million won investment. Considering that commercial bank time deposit interest rates are around 2.6%, this is a return more than five times higher.
The entry of outside investors into Ulsan is already gaining momentum. As of March, the number of purchases by non-residents reached 231, the highest in the last two years. Apartment sales transactions between January and May of this year totaled 6,940, a 22% increase compared to the 5,690 recorded during the same period last year.
Changes in the presale market are even more dramatic. Following the 2,033-unit Lael S, which recorded the highest number of subscription applications in three years last May and sold out in two months, the recently preselling Hanwha Forena Ulsan Mugeo is also expected to sell out early.
Within Ulsan, the gap in growth between regions is distinct. As of the fourth week of August, Nam-gu saw the highest rise at 0.07%, followed by Buk-gu (0.05%) and Jung-gu (0.04%). While Dong-gu dipped by 0.01%, it recorded a 0.06% rise in the jeonse market.
Mid-to-small-sized apartments centered around Mugeo-dong and Sinjeong-dong in Nam-gu, as well as large complexes in Buk-gu, are leading the growth. In particular, large complexes in Hwajeong-dong and Seobu-dong of Dong-gu, which have good accessibility to shipyards, are showing strength, centered on the jeonse market.
The ripple effect of the shipbuilding boom on real estate is multi-layered. First, the job creation effect is significant. Currently, there is a shortage of about 20,000 production workers in Ulsan's shipbuilding industry, and demand for additional labor is expected to surge when the MASGA project is implemented in earnest.
The income growth effect is also substantial. HD Hyundai Heavy Industries' operating profit for the second quarter was 471.5 billion won, a 141% increase compared to the same period last year, and such performance improvement leads directly to wage increases. Considering the synergistic growth effect of some 580 partner companies, the income increase effect for the entire region is expected to be very large.
The population inflow effect is also worth noting. Calculating back from the experience of the shipbuilding recession in 2016, when the number of shipbuilding industry workers in Dong-gu, Ulsan, dropped by 35% from 57,077 to 37,296 in 2020, one can expect a significant population inflow effect when business conditions improve.
Of course, there are risk factors. Political changes in the U.S., intensifying competition with China, and domestic labor shortages can act as variables. In particular, rising prices of steel, a major raw material for the shipbuilding industry, could have a direct impact on profitability.
However, the opportunities far outweigh the risks. With the collapse of the U.S. shipbuilding industry (0.1% market share) coinciding with the need to keep China in check, the strategic value of the Korean shipbuilding industry is rising. Considering that Korea overwhelms the U.S. in productivity (2,405 commercial ships vs. 37 ships over 10 years) and maintains a cost competitiveness advantage of more than three times, the possibility of the MASGA project's success is very high.
The upward trend in Ulsan's real estate market is not a temporary phenomenon. It is a perfect combination of structural supply shortages and an industrial boom. With the annual supply of new homes expected to plummet to 1,000 units per year after 2026, the upward pressure is bound to become even stronger as population inflow and income growth from the MASGA project overlap.
In the jeonse market, the shortage is already at a serious level. The jeonse-to-purchase price ratio of 76.5% is the highest in the country, and the shortage of available homes is accelerating the shift to monthly rent. The fact that Ulsan's monthly rent price index rose by 0.22%, similar to Seoul (0.23%), supports this.
The key to real estate investment in Ulsan lies in timing and regional selection. While the initial window of opportunity has passed as the rise has already begun, analysis suggests the full-scale growth is only just starting.
Mugeo-dong and Sinjeong-dong in Nam-gu are considered the top investment destinations. They have excellent accessibility to shipyards and high livability, and new supply is limited. Large apartment complexes currently in presale, such as Hanwha Forena Ulsan Mugeo, can be good investment targets.
The area around Beonyeong-ro in Jung-gu is also noteworthy. High-rise apartments like Beonyeong-ro Lotte Castle Central Sky are being supplied, so one can expect a future landmark effect.
Dong-gu is analyzed as a relatively undervalued region. It is closest to the shipyards and has strong jeonse demand, but sales prices are relatively low, making it highly attractive for investment.
In particular, it is worth focusing on jeonse investments. Although Ulsan's current jeonse-to-purchase ratio of 76.5% is very high, jeonse demand is expected to increase further if sales prices rise in the future. Some analysis suggests that capital gains of over 50 million won are possible within five years for gap investments.
In a situation where there are investment targets that can generate a 13% annual return with a small amount of around 40 million won, this could actually be an opportunity for investors with limited capital.
The changes in Ulsan's real estate market sparked by the MASGA project have only just begun. The ripple effect of a 208 trillion won investment and the shipbuilding renaissance will be a powerful driving force underpinning the Ulsan real estate market for the next 5 to 10 years.
Seven consecutive weeks of growth, the highest growth rate in the nation, extreme supply shortages, and a jeonse shortage. All favorable factors are concentrated in Ulsan's real estate market. Now, while it is still relatively undervalued compared to Seoul and the metropolitan area, may be the golden time for Ulsan real estate investment.
However, investment always carries risks. It is necessary to monitor the substantive progress of the MASGA project, political variables, and global economic conditions closely and approach with caution. But one thing is clear: the winds of a "Great Age of Shipbuilding" are blowing through the Ulsan real estate market.
Kim Hak-ryeol, the head of the Smart Tube Real Estate Research Institute, known by his pen name "Pashong," previously served as the head of the Real Estate Research Division at Gallup Korea. He operates and hosts the Naver blog "Pashong's World Exploration" and the YouTube channel "Stew TV." He is the author of "The Power of Gyeonggi-do Real Estate (2024)," "Absolute Principles of Seoul Real Estate (2023)," "The Future of Incheon Real Estate (2022)," "Kim Hak-ryeol's Absolute Principles of Real Estate Investment (2022)," "Future Map of South Korea Real Estate (2021)," "From Now On, Only Places That Rise, Rise (2020)," and "South Korea Real Estate User Manual (2020)."