[Real Estate Investment] Low Price Points, Worth Targeting Medium to Large Apartments in 'Bokbulbok Subscription'

Tips for Prospective Pre-Applicants
About 5,000 Units Expected to Be Released by April
Mid-Loan Not Available for Seoul Properties Over 900 Million Won
Prepare Cash for Final Payment First

[Asia Economy Reporter Donghyun Choi] Due to the impact of the private land price ceiling system and the December 16 real estate measures, housing supply is expected to shrink significantly in the future, heating up the subscription market as demand to secure new apartments rises. In particular, as the competition intensifies and the winning cutoff scores soar to unprecedented levels, prospective applicants with low points are facing the reality of giving up their dream of owning a home. However, it is not entirely impossible. Experts advise that for some medium-to-large units, which are supplied through a lottery regardless of points, those with sufficient cash liquidity should seize opportunities through persistent attempts.

Medium-to-large apartments exceeding 85㎡ of exclusive area are becoming increasingly scarce in value. This is because, due to the rise of single-person households, the housing market has mainly supplied small-to-medium units under 85㎡. According to the Ministry of Land, Infrastructure and Transport’s annual statistics on apartment supply in Seoul, the supply ratio of units exceeding 85㎡ has steadily declined from the 17% range in 2014 to 9% in 2018. On the other hand, in recent years, due to the government's strengthened regulations on multi-homeowners, a craze for owning a single smart property has emerged, increasing the popularity of medium-to-large apartments that were relatively undervalued.

This is evidenced by a survey conducted by the real estate brokerage platform Zigbang on the price increase rate per 3.3㎡ by housing size in Seoul over the past two years from 2017 to last year. The price increase rate of medium-to-large apartments in Seoul, which had been weak, recently surpassed that of small-to-medium units. Until 2017, apartments with a supply area of 66㎡ or less were priced at 20.01 million KRW per 3.3㎡, making them the second most expensive after apartments exceeding 165㎡. However, in the past two years, the rate of increase has significantly slowed, falling short of medium-to-large units. As of early December last year, the average price per 3.3㎡ by apartment size was 25.02 million KRW for 66㎡ or less, 25.40 million KRW for 66~99㎡, 26.85 million KRW for 99~132㎡, and 26.47 million KRW for 132~165㎡.

From January to April this year, about 55,000 apartment units are scheduled to be supplied in the Seoul metropolitan area, including Seoul. Considering that the proportion of medium-to-large units is usually around 10%, it is estimated that about 5,000 medium-to-large units will be released during this period. Under the current subscription system, for private housing supplied in speculative overheated districts such as Seoul, units under 85㎡ are allocated 100% by points, while units exceeding 85㎡ are allocated 50% by points and 50% by lottery. Among the lottery units, 75% are preferentially allocated to those without homeownership.

For example, the 'Hoban Summit Songpa 1 & 2' in Bukwirye, Songpa-gu, which was supplied on the 26th of last month, had 1,389 medium-to-large units. Half of these were supplied through a lottery. Since Wirye New Town is a public land site subject to the price ceiling system, it is known that winning can yield a minimum market price gain of 500 million KRW. As a result, many cash-rich individuals applied with their subscription accounts. According to the first-priority subscription tally, the first phase had 11,123 applicants for 689 units, recording an average competition rate of 16.14 to 1, and the second phase had 23,701 applicants for 700 units, with an average competition rate of 33.86 to 1.

However, when challenging the medium-to-large lottery subscription, it is necessary to carefully plan financing due to tightened loan regulations. In Seoul, medium-to-large units generally exceed 900 million KRW, making interim payment loans unavailable. Also, if the house price exceeds 1.5 billion KRW at the time of move-in, the balance loan may be blocked, which should be understood in advance. A representative from the sales industry said, "The supply of medium-to-large units is decreasing, so premiums are being added due to scarcity value," adding, "Nowadays, in good locations, the winning points for medium-to-large apartments are also rising, so competition for the lottery system is expected to become even fiercer."

This content was produced with the assistance of AI translation services.