Subscription 'Residence Obligation'... Concerns Over Solidification of Cash-Rich League

[Asia Economy Reporter Yuri Kim] Concerns are rising that the threshold for newly supplied apartments in prime areas of Seoul and the metropolitan area will become even higher for low-income households without homes. This is due to the imposition of a mandatory residence period on units subject to the private land price ceiling system starting February next year. With the government tightening not only mortgage loans but also credit loans, there are concerns that the new apartment supply market could become a "league for cash-rich buyers only."

According to the real estate industry on the 22nd, winners of apartments subject to the price ceiling system from February 19 next year must reside in the unit for at least two years immediately after completion. The mandatory residence period for public land is five years if the sale price is less than 80% of the nearby market price, and three years if it is between 80% and less than 100%. For private land, the mandatory residence period is three years if the sale price is less than 80% of the nearby market price, and two years if it is between 80% and less than 100%. If the residence obligation is violated within three months from the initial move-in date, a prison sentence of up to one year or a fine of up to 10 million KRW will be imposed. If moving during the mandatory residence period, the unit must be sold first to Korea Land and Housing Corporation (LH) or similar entities. Exceptions for overseas stays, work, livelihood, schooling, or medical treatment in other regions during the mandatory residence period can be recognized as residence in the unit only after confirmation by LH.

For apartments with a residence obligation, it becomes impossible to rent out the unit at the time of completion to pay the remaining balance. A maintenance industry official said, "In reality, you will need to have at least the deposit amount of your current jeonse (long-term lease) without a loan to apply for subscription," adding, "This also varies depending on the complex's sale price and market price."

The situation becomes more complicated when considering loans. Mid-term group loans are prohibited for apartments priced over 900 million KRW, and mortgage loans at the time of the final payment vary in loan-to-value ratio (LTV) from 40% for properties under 900 million KRW to 0% for those exceeding 1.5 billion KRW, depending on the market price. For homes with a market price exceeding 1.5 billion KRW at the time of final payment, funds must be prepared without mortgage loans.

The obligation to actually reside when taking out loans has already been implemented through the June 17 measures. When purchasing a home in any regulated area with a mortgage loan, there is an obligation to move in within six months regardless of the housing price. Critics say it has become even harder for low-income households who need loans to pay for new apartments to buy homes. Therefore, it is necessary to first check whether the complex allows mid-term loans, whether the applicant meets loan requirements, the expected market price at the time of final payment, and how much mortgage loan can be obtained accordingly, to determine if actual residence is feasible.

The government introduced these policies to block speculative demand and expand housing opportunities for genuine buyers, but ultimately, it has narrowed the door to the subscription market to "genuine buyers who hold cash." Industry insiders say that the minimum two-year residence obligation is insufficient to solve the problem of excessive market price gains given to general sale winners.

Genuine buyers aiming for large-scale complexes such as Dunchon Jugong, whose general sales have been postponed again to next year due to controversies over sale prices, need to consider variables such as clearly understanding their financial capacity. Ham Young-jin, head of the Zigbang Big Data Lab, said, "I believe the sales market next year will be divided into opportunities and challenges," adding, "From early next year, opportunities will open more for applicants waiting for subscriptions who meet the relaxed income requirements for newlyweds and first-time homebuyers, as well as the pre-subscription conditions for the 3rd New Towns in the second half of the year. However, for major metropolitan areas subject to the price ceiling system, applicants need to carefully consider whether they can meet the mandatory residence requirements in terms of funds and environment."

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