'Another Regulatory Backlash'... Sharp Rise in Sale Prices of Pre-sale Rights in Metropolitan Cities Due to Resale Restrictions

[Asia Economy Reporter Lee Chun-hee] Prices of pre-sale rights in local metropolitan cities are soaring. Since the government imposed extensive regulations on the resale of pre-sale rights in local metropolitan cities last September, the popularity of existing pre-sale rights that avoided these regulations has ironically surged, creating a 'backlash' effect.

Since last September, the government has significantly extended the restriction period on the resale of pre-sale rights for private apartments in metropolitan areas of both the Seoul metropolitan area and local metropolitan cities, from the previous 6 months after winning the subscription lottery to until the ownership transfer registration is completed.

However, according to KB Kookmin Bank on the 28th, apartment prices in Busan, which had only risen by about 1.1% monthly on average from January to September, jumped by an average of 4.1% over two months until November after the resale restriction was implemented. Other regions such as Ulsan (1.1%→3.1%), Daegu (0.6%→1.9%), and Gwangju (0.3%→1.0%) also saw an upward trend triggered by the regulation enforcement.

Perspective view of 'Doosan We've the Zenith Harbor City' in Dong-gu, Busan (Provided by Doosan Construction)

Looking at specific complexes, the pre-sale right for a 75㎡ (exclusive area) unit at 'Doosan We've the Zenith Harbor City' in Beomil-dong, Dong-gu, Busan, was traded last month for 784.75 million KRW (27th floor), setting a new record price. Compared to the pre-sale price of 371.6 million KRW at the time of sale in May last year, the price more than doubled in just 1 year and 7 months.

The pre-sale right for an 84㎡ unit at 'Hillstate Daegu Station Opera' in Goseong-dong 1-ga, Buk-gu, Daegu, also changed hands for 757.67 million KRW (29th floor) on the 1st. It was sold for 565 million KRW in May, but the price rose by 33.9% in just 7 months.

Kim Byung-gi, head of the sales evaluation team at Real House, said, "Prices of not only existing apartments but also pre-sale rights are rapidly rising," adding, "Because the gap between pre-sale right prices and pre-sale prices is so large, the pre-sale market is likely to remain strong going forward."

Moreover, although the resale restriction was introduced to cool down the overheated pre-sale market, it appears that the intended policy effect has not been achieved. Instead, subscription competition rates have surged after the regulation.

According to the Korea Real Estate Board on the same day, the average competition rate for first-priority subscription applications for 'Doosan We've the Zenith Central Saha' in Jangnim-dong, Saha-gu, Busan, which received applications on the 15th, was 16.3 to 1. This is the highest subscription competition rate recorded in Saha-gu since 2016, with 14,355 subscription accounts submitted for first-priority applications alone.

On the same day, 'Hillstate Cheomdan' in Ssangam-dong, Gwangsan-gu, Gwangju, which recruited 213 households, attracted 48,720 applicants for first-priority subscriptions. With an average competition rate of 229 to 1, this is the highest subscription competition rate ever recorded in Gwangju.

Consequently, expectations for local housing prices are increasingly weighted toward 'further increases.' According to KB Kookmin Bank, last month the KB Real Estate Sales Price Outlook Index reached 121.6, breaking the highest record since the related statistics began in April 2013. This index surveys member real estate agents of KB Kookmin Bank about their market forecasts; a value above 100 (on a scale of 0 to 200) indicates that many agents expect housing prices to rise further.

An industry insider pointed out, "The government has issued real estate measures 25 times so far but has failed to curb the rising trend in housing prices," adding, "As regulations are strengthened by region, consumers are even beginning to perceive regulated areas as 'regions where the government has verified that housing prices will rise.'"

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