Metropolitan Area and Provincial Metropolitan Cities, Restriction on Transfer of Ownership Registration for Pre-sale Rights (Comprehensive)

[Asia Economy Reporter Yoo In-ho] The resale restriction period for houses constructed and supplied in private land in the metropolitan area’s overconcentration control zones and growth management zones, as well as urban areas of provincial metropolitan cities, will be strengthened from 6 months to until the ownership transfer registration.· This is a measure to block speculative demand and supply housing centered on actual demanders.

The Ministry of Land, Infrastructure and Transport announced on the 11th that to block speculative demand and increase the winning probability for actual demanders, resale of pre-sale rights will be prohibited until ownership transfer registration in the metropolitan area’s overconcentration control zones, growth management zones, and urban areas of provincial metropolitan cities.

Currently, houses constructed and supplied in private land in the metropolitan area and provincial metropolitan cities that are not regulated areas are subject to a 6-month resale restriction period.

Because the resale restriction period is relatively short, speculative demanders who apply for pre-sale rights for the purpose of resale have flowed in, resulting in more than 40% of this year’s pre-sale complexes recording subscription competition rates exceeding 20 to 1, causing continuous overheating in subscription areas.

In fact, Hyundai Construction’s “Hillstate Songdo The Sky,” which was pre-sold in March in Songdo International City, Incheon, recorded the highest average competition rate in the history of Songdo International City pre-sales at 72.17 to 1, with 58,021 applicants for 804 households.

In the same month, “Siheung Janghyeon Yeongmu Yedam” in Siheung City, Gyeonggi-do, recorded the highest competition rate in Siheung City’s history with an average of 50.2 to 1.

An analysis of complexes pre-sold from 2017 to 2019 in private land in the metropolitan area and metropolitan cities that recorded subscription competition rates exceeding 20 to 1 showed that on average, one out of four winners sold the pre-sale rights within 6 months after the resale restriction period ended.

The Ministry of Land plans to complete the revision of the Enforcement Decree of the Housing Act by August to strengthen the resale restriction period.

They intend to strengthen the resale restriction period for areas designated as urban areas according to the Enforcement Decree of the “Metropolitan Area Readjustment Planning Act” overconcentration control zones and growth management zones, the “National Land Planning and Utilization Act,” and local government urban and county management plans where the relevant houses are located.

The overconcentration control zones include non-regulated areas such as Incheon City (excluding some areas like the Free Economic Zone), Uijeongbu City, Siheung City, Bucheon City, and Siheung City. The growth management zones include many outer metropolitan area cities such as Dongducheon City, Paju City, Osan City, Pocheon City, Hwaseong City, Yangju City, and Yeoncheon County.

A Ministry of Land official said, “The extension of the resale restriction period is expected to increase the winning probability for actual demanders,” and added, “We will continue to strive to expand opportunities for home ownership through housing supply centered on actual demanders.”

Experts predict that resale transactions of pre-sale rights in non-regulated areas will decrease after August. As of March this year, the nationwide resale transaction volume of pre-sale rights was 33,147 cases, averaging 11,049 cases per month. This is a 31.4% increase compared to the 8,403 cases monthly average in 2019.

With abundant idle funds in the market and strong subscription enthusiasm for apartments, a balloon effect occurred where resale transactions of pre-sale rights increased mainly in non-regulated areas such as Gimpo City and Pyeongtaek City, where the resale restriction period is short at about 6 months, avoiding regulated areas such as speculative overheating zones in Gyeonggi-do.

In a situation where economic uncertainty has increased due to the novel coronavirus disease (COVID-19), non-regulated areas with high liquidity and the possibility of short-term capital gains could have been attractive to demanders.

Ham Young-jin, head of the Zigbang Big Data Lab, said, “From August onwards, resale transactions of pre-sale rights will decrease,” and added, “From the first day the supply contract is possible according to the resident recruitment announcement to the ownership transfer registration of the relevant house, transactions will not be allowed.”

However, there are also concerns that a flood of resale transaction volumes may occur in complexes scheduled for pre-sale between May and August, before the resale regulations in the relevant areas are strengthened.

The number of households scheduled to be supplied in areas where resale transaction restrictions will be strengthened between May and August before the revision of the Enforcement Decree of the Housing Act reaches 137,698 households, accounting for about 57.9% of the 237,730 households scheduled for supply by December this year.

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