"'Increasingly Like Lotto' Controversy Over Unfairness in Subscription System... 'Time for Reform'"

Archive photo / Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Kim Yuri] As winning apartment subscriptions in major areas guarantee several hundred million won in market price gains, the market overheating trend is intensifying, and controversies over unfair subscription criteria are also growing. Since only patchwork modifications have been made without changing the existing framework, those who missed the opportunity to enter the subscription market have driven up prices in the existing market, leading to further supplementary measures, causing distortions throughout the market. Experts analyze that fundamental changes should be attempted in the second half of this year when the market slows down due to measures such as the private land price ceiling system.

Industry insiders point to the subscription market point system reform implemented three years ago as one of the causes of the recent 'panic buying' among people in their 30s. The government expanded the application of the subscription point system in speculative overheated zones and regulated areas when it announced the August 2, 2017 measures. In particular, for private housing subscriptions in speculative overheated zones including Seoul, all units under 85㎡ were changed to the point system. The intention was to prioritize the homeless, but the subscription point system scores not only the period of homelessness (32 points) but also the number of dependents (35 points) and the subscription savings period (17 points), selecting residents in order of highest total score. Therefore, households aged 40-50 or older with long subscription savings periods and many dependents have an advantage. Previously, with 75% point system and 25% lottery system, those in their 30s and those looking to switch from one house to another, who were relatively disadvantaged in dependents and subscription savings period, could delay purchasing existing homes while hoping to win subscriptions, but now they have been deprived of the opportunity itself. Since most of the supply consists of units under 85㎡, these groups find it difficult to secure a home in the subscription market.

To make matters worse, housing prices continued to rise. According to the 'Real Estate Transaction Report Using Registration Data' recently published by Hana Financial Research Institute, the price per 1㎡ of collective buildings (apartments, multi-family houses, row houses, officetels, and other commercial buildings) in Seoul rose about 28% over the past 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 Appraisal Board statistics increased by 45.5%. The average actual transaction price (39.1%), median actual transaction price (38.7%), and sales price index (14.2%) all rose. As housing prices soared and subscription opportunities were lost, anxious buyers purchased existing homes. Despite the decreasing proportion of people in their 30s in Seoul, the share of apartment purchases by this age group increased from 25.3% in the first half of last year to 29.8% in the second half and 31.1% in the first half of this year. The Korea Research Institute for Construction Industry diagnosed that "due to growing anxiety about the future housing market centered on people in their 30s, future demand is being brought forward to the present."

The government is striving to expand housing supply for young people in their 20s and 30s and newlyweds. It is continuously increasing supply through newlywed hope housing and special supply for newlywed couples. However, these are focused on specific groups requiring social consideration and do not apply to housing demand such as dual-income households in their 30s excluded from general private housing supply.

The government has repeatedly relaxed criteria for these 'special supplies,' but income and other requirements remain restrictive, making it difficult for dual-income households to win. The July 10 measures announced relaxation of income requirements for special supply of homes priced over 600 million won for newlyweds, but 75% of the priority supply still requires urban worker average monthly income of 100% (120% for dual-income), and the remaining 25% general supply is relaxed only for first-time buyers to 130% (140%). These applicants must compete with first-priority losers. Therefore, it is still evaluated that 'general newlywed couples' are not eligible. The Ministry of Land, Infrastructure and Transport hinted at possible further income criteria relaxation but there are also criticisms of 'generalizing special supply.' A maintenance industry official said, "From a housing welfare perspective, priority benefits should go to groups needing more support in income, so gradually generalizing special supply is also unfair."

Complaints from the 50s and 60s generation and single homeowners of multi-family houses on the outskirts of Seoul are also growing. As special supply for '2030 newlyweds' continues to expand, the general supply available to them is steadily decreasing. According to the special supply plan announced in the July 10 measures, general supply in national housing accounts for only 15% of total supply. In private housing, this ratio is gradually decreasing, with private housing supplied on public land at 42% and on private land at 50%, less than half. This is why complaints arise that "after waiting for years to reach the winning range through the point system, the door to general supply is gradually narrowing."

Experts say that instead of patchwork fixes, the entire problematic situation should be reviewed and improved. Doosung Kyu, senior research fellow at the Korea Research Institute for Construction Industry, said, "With over 10 million first-priority subscription accounts, it is time to discuss revising the entire subscription system, such as strengthening first-priority criteria or making those who have won subscriptions previously lower priority. If we do not hurry, conflicts will continue to intensify." He added, "The current situation where 'lottery subscriptions' give market price gains only to winners does not align with government policy direction or social justice. We need to seriously consider measures such as greatly strengthening resale restrictions so only actual users can resell or introducing bond bidding systems in popular areas to instill the perception of 'fair opportunity for all.'" Professor Kwon Dae-jung of Myongji University Graduate School of Real Estate also said, "The current government subscription policy divides winners and losers, deepening generational conflicts. We need to consider new methods, such as having homeless applicants compete by generation."

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