'30-Year Installment Public Housing' Seoul City Proposes to Ministry of Economy and Finance

Only Pay 40% of the House Price at the Time of Purchase

Seoul apartment complex view. [Image source=Yonhap News]

[Asia Economy Reporter Donghyun Choi] The Seoul Metropolitan Government is promoting a 30-year installment public housing sale as part of its housing supply measures.

According to Seoul City on the 23rd, at the 2nd meeting of the 'Task Force for Expanding Housing Supply' held the previous day, the Ministry of Economy and Finance was presented with the agenda of 'equity accumulation type sale housing.' This method allows buyers to initially purchase only 40% of the equity when buying a house and gradually increase the remaining equity over 20 to 30 years. A Seoul city official explained, "It is not finalized yet, but it was proposed to the Ministry of Economy and Finance," adding, "It is expected to be utilized in public sale housing developed by Seoul Housing and Communities Corporation (SH) and Korea Land and Housing Corporation (LH), among others."

This method is expected to significantly reduce the initial cost of purchasing a house. For example, if buying a house priced at 500 million KRW, the buyer would pay only 40% of the price, 200 million KRW, by the time of move-in, and repay the remaining 300 million KRW in installments over 30 years. If the house is sold in the meantime, only the equity held up to that point needs to be sold. However, in case of sale, the price applied will be based on an appraisal value or a fixed deposit interest rate rather than the market price. Additionally, it is expected to partially block so-called 'lottery subscription' aimed at short-term speculative gains.

Seoul City initially considered increasing supply through land leasehold housing but saw limitations in this approach alone, leading to the proposal of equity accumulation type sale housing. Land leasehold housing is a method where the public owns the land, and the buyer purchases only the building and pays land rent. Since it can be supplied at a low sale price excluding land costs, it is expected to stabilize housing for low-income residents. During the Lee Myung-bak administration in 2011, some houses in Gangnam-gu and Seocho-gu were supplied as land leasehold housing. At that time, the sale price for 84㎡ (exclusive area) was in the low 200 million KRW range, about one-quarter of the surrounding market price. However, currently, even considering only the building excluding land, prices have surged, making it difficult to expect housing stability with this method alone. The current market price of the LH Gangnam Breeze Hill 84㎡, supplied as land leasehold housing in 2012, is 1.2 billion KRW, six times higher than the initial sale price (in the low 200 million KRW range) at that time.

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