Revised Point System Triggering 'Panic Buying'... Growing Fairness Concerns in Cheongyak Market

[Asia Economy Reporter Kim Yuri] Since the Moon Jae-in administration, the arbitrary adjustments to the subscription system have not only fueled controversies over unfairness in housing subscriptions but also exacerbated the rise in housing prices. Previously, the private apartment subscription method had an appropriate balance between the lottery system and the point-based system, but by significantly increasing the proportion of the point-based system, younger generations were excluded from the subscription market, triggering so-called 'younggeul loans' (loans gathered to the soul) for home purchases among the 30s and 40s age groups. Additionally, the government faced criticism for alienating the 40s and 50s generations from the market by increasing the proportion of special supply quotas under the pretext of expanding subscription opportunities for young people. Since the government responded by dividing the existing supply pie rather than increasing it, there are concerns that trust in the policy is being lost.

◆ "Panic buying was predicted three years ago"

According to industry sources on the 17th, the cause of the recent surge in housing prices in the outskirts of Seoul, which triggered 'panic buying,' is attributed to the expansion of the point-based system for private housing under 85㎡ (exclusive area) announced in the August 2, 2017 measures. Until then, 75% of the supply in speculative overheated zones was allocated to the point-based system, but it was increased to 100%, excluding younger people with low points from the market. An industry insider explained, "The 30s and 40s generations, who are disadvantaged in terms of no-home period (32 points), number of dependents (35 points), and subscription savings period (17 points), effectively lost 25% (lottery system) of the supply."

Experts diagnose that as housing prices soared in this process, no-home owners and one-home replacement demanders flocked massively to the general sales market. According to the 'Real Estate Transaction Report Using Registration Data' released by Hana Financial Research Institute the day before, the transaction price per square meter of collective buildings such as apartments and row houses in Seoul increased by about 28% over the recent three years (May 2017 to May 2020) since the current government took office. During the same period, the actual transaction price index based on Korea Real Estate Agency statistics rose by 45.5%. The Korea Institute of Construction Industry and Economy (KICIE) diagnosed, "Amid growing anxiety about the future housing market centered on people in their 30s, a phenomenon of future demand being brought forward to the present is being observed."

◆ Expansion of 'special supply' to appease young people fuels unfairness controversy

The adjustment of special supply quotas to appease young people in their 20s and 30s and newlyweds has rather intensified fairness controversies and backfired. This is because increasing the special supply proportion for newlyweds and first-time homebuyers in national and private housing has reduced the general supply, which is relatively allocated to long-term no-home owners.

According to the special supply plan announced through the July 10 measures, the general supply in national housing has shrunk to 15% of the total supply. In private housing, the supply on public land is 42%, and on private land, it is 50%, both falling short of half. An industry insider pointed out, "As the government keeps changing the subscription system here and there to appease public sentiment, even the foundation of the subscription system is being shaken."

Experts point out the need for a comprehensive reform of the subscription system considering fairness. Doosung Kyu, senior research fellow at KICIE, said, "With over 10 million first-priority subscription accounts, it is time to discuss overall revisions to the subscription system, including strengthening the first-priority criteria," expressing concern that "if rushed, conflicts between generations and classes will only intensify." Professor Kwon Dae-jung of Myongji University Graduate School of Real Estate also said, "The current government subscription policy divides those who qualify and those who do not, deepening conflicts between generations," and added, "We need to consider new methods, such as having no-home subscribers compete by generation."

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