[Burini Guide] 'They say catch the last train before resale restrictions...' What are resale restrictions on pre-sale rights?

[Asia Economy Reporter Lee Chun-hee] When you become a real estate reporter, you sometimes get unexpected KakaoTalk messages from friends. "How do I apply for a housing subscription?" "What does first priority mean?" To guide the 2030 'Burin-i (Real Estate + Child)', for whom the subscription savings account is just an account their parents opened when they were young, I have prepared this guide.

One of the recent hot issues in the real estate market is the 'restriction on resale of pre-sale rights.' The government has identified speculative demand entering the market for the purpose of reselling pre-sale rights as one of the causes of the recent overheating in subscription applications, and has announced a measure to completely ban the resale of pre-sale rights until the ownership transfer registration for most areas in the metropolitan area and major provincial cities until August. Today, we will learn about these restrictions on resale of pre-sale rights.

What is restriction on resale of pre-sale rights? In short, 'You can't buy or sell freely.'

At a model house of a newly built apartment in Seoul, prospective buyers are gathered, listening to the guide's explanation while looking at the scale model. (Photo by Lee Chunhee)

First, let's understand the meanings of 'pre-sale rights' and 'resale restriction.' Pre-sale rights are commonly referred to together with move-in rights as pre-sale/move-in rights. Both rights grant the holder the right to enter a newly built apartment that has not yet been completed or occupied. However, move-in rights are held by members of redevelopment associations, while pre-sale rights are held by those who have received special or general pre-sale allocations, so there is a slight difference.

The difference between these two rights becomes greater when it comes to 'resale restrictions.' Resale restriction means prohibiting the sale of a certain item. In other words, restriction on resale of pre-sale rights prohibits buying and selling pre-sale rights for a certain period. Usually, this resale restriction is set by the government in various ways, ranging from 6 months to until the ownership transfer registration. Since the ownership transfer registration date usually coincides with the completion and move-in time, it can be understood as a similar concept to 'resale restriction until move-in' or 'resale restriction until completion.'

On the other hand, resale restrictions on move-in rights are somewhat more flexible than those on pre-sale rights. For example, in speculative overheated districts like Seoul, resale of reconstruction move-in rights is generally prohibited after the approval of the association establishment, but redevelopment move-in rights can be traded freely before the approval of the management disposition plan. If the project received implementation approval before January 24, 2018, there are no transfer restrictions. However, pre-sale rights with set resale restriction periods cannot be traded during that period except in exceptional cases such as moving, immigration, or divorce.

Usually, when these pre-sale or move-in rights are traded, a 'premium' naturally attaches, raising the price. Moreover, since the pre-sale price is often set significantly lower than the market price, many buyers aiming for short-term capital gains have been active, as holding for just 6 months could yield substantial profits. Naturally, allowing resale of pre-sale rights has been cited as one of the causes of the current real estate market rise. In fact, an analysis of complexes in the metropolitan area and major provincial cities with subscription competition rates exceeding 20 to 1 over the past three years from 2017 to last year showed that about one in four winners sold their pre-sale rights within just 6 months after the resale restriction period ended.

From now on, full resale restriction in metropolitan and major cities... Subscription market expected to heat up until August

This measure is not entirely new. Resale restrictions on pre-sale rights were introduced 40 years ago in 1981, with only changes in targets and periods over time. Currently, in private land, resale is prohibited until move-in in speculative overheated districts, from 6 months to ownership transfer registration depending on the area in regulated areas, and for 6 months in other metropolitan and provincial major cities. Even in public land, resale is prohibited for up to 10 years after winning in speculative overheated districts.

This measure effectively unifies the previously differentiated resale restriction periods in private land. From around August, the resale restriction period for pre-sale rights in private land in Seoul, most of the metropolitan area, and major provincial cities will all be limited until move-in.

Accordingly, the industry expects the subscription market to temporarily heat up further until the full resale restriction is implemented. For example, the 'Safe Resale Program,' which sets the intermediate payment date after the 6-month resale restriction period, attracted 84,730 applicants for 3,134 units in the general subscription held on the 9th at 'Geomam Station Royal Park City Prugio' in Incheon, marking the highest number of subscription applications in the Incheon area.

Construction companies are also expected to hurry preparations for pre-sale. Since resale of pre-sale rights will be banned, they aim to secure stable profits through higher competition rates before the subscription market is reorganized around actual demand.

Once the full resale restriction is realized, it is expected to have a 'demand suppression' effect, calming the recently overheated subscription market. However, many remain skeptical about whether it will bring comprehensive market stabilization. Just as regulations centered on Seoul have led to a 'balloon effect' in southern Gyeonggi and Incheon areas, it is expected that a similar balloon effect may occur in the move-in rights market with additional premiums attached.

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