Is the 'Lotto Subscription' Phenomenon of Sweeping Up Price-Sale Profit Acceptable... Alternatives to the Subscription Method

Attention on Land Lease and Repurchase Condition Housing Sales
"Sale Price Should Be Lowered and Repurchase Restriction Period Shortened"

Due to the government's strengthening of real estate holding taxes, the prices of major reconstruction-targeted apartments in key areas of Seoul, which had declined, are showing an upward trend again starting from the golden holiday period.
The market price of Jamsil Jugong Complex 5, which recorded the highest price of 2.13 billion won just before the December 16th measures last year and had dropped to 1.8 to 1.82 billion won in urgent sale prices by the end of last month, rose to 1.85 to over 1.9 billion won as the market sentiment changed during the holiday period. The photo shows the Jamsil Complex 5 Jugong apartment complex in Seoul on the morning of the 3rd.

As the apartment subscription system has earned the notorious nickname of 'lottery subscription,' attention is turning to alternative sales methods to prevent the lottery subscription phenomenon. Under the current system, the structure allows subscribers (those who receive the sale) to monopolize the profit margin between the low sale price and the future market price. There are growing voices that this situation, where lottery subscriptions lead to increased asset disparities and other social costs, should not be left unchecked. This is why land leasehold and repurchase condition sales methods are being reconsidered as alternatives.

On the 25th, the Korea Research Institute for Human Settlements released a report titled 'Directions for Improving Alternative Sales Methods,' highlighting land leasehold and repurchase condition housing sales?methods introduced in the past but failed?as ways to minimize private profits from sales, and proposed institutional improvements.

Land leasehold housing is a sales method where the state leases the land. Unlike typical apartment sales, the land is publicly owned or leased, and only the building cost is reflected in the sale price. Because of this, the price is cheaper, and during the Lee Myung-bak administration, it was even called 'half-price apartments.'

Repurchase condition housing is sold on the condition that it can be resold to public institutions such as LH. Even if purchased, inheritance and transactions are restricted. The sale price is kept low, and no market price gains can be expected. Even if resold to a public institution, the price received is structured to be only the supply cost plus some interest.

Land leasehold housing was first introduced in 2007 but ended in failure. At that time, 80% of the land leasehold housing units were converted to general sales methods to complete sales, indicating significant difficulties. The repurchase condition housing attempted in 2010 also suffered humiliation, with unsold units reaching about 92% even in additional recruitment.

The failures of the two methods were analyzed as being due to their complete failure to reflect market investment demand.

First, the reasons land leasehold housing did not succeed were pointed out as △excessive land lease fees △housing depreciation △high sale prices.

The failure of repurchase condition housing was attributed to △excessively long repurchase periods (20 years) △low returns due to sale and repurchase prices differing from market expectations.

Seonghwan Kim, Associate Research Fellow at the Korea Research Institute for Human Settlements, said, "It is urgent to improve the shortcomings pointed out in past pilot projects," and suggested, "The land leasehold housing sales system should provide affordable land lease fees by reducing land development costs."

He added, "Unlike in the past, since land lease fees and sale prices are legally regulated, the scope for adjustment is narrow, so sales and management costs among the land development costs that form the basis for calculating land lease fees should be minimized."

Improvements suggested for the repurchase condition housing sales system included shortening the resale restriction period and lowering sale prices.

Associate Research Fellow Kim emphasized, "Although repurchase condition housing had a 20-year resale restriction period, the sale price was higher than market expectations. The repurchase period should be shortened to a level similar to that of houses subject to the current sale price ceiling system, or a low sale price should be set that can endure an additional 10-year resale restriction period."

Meanwhile, Changhoom Byun, Minister of Land, Infrastructure and Transport, has strongly advocated for the introduction of land leasehold and repurchase condition housing, calling them 'public owner-occupied housing' long before his appointment.

In his 2006 paper, 'Ideological Basis and Policy Effects Analysis of Public Owner-Occupied Housing,' written during his tenure as a professor at Sejong University, he defined these two types of housing as public owner-occupied housing and argued that these types should be introduced to solve housing problems.

In particular, in the paper, he proposed making repurchase conditions mandatory to recover capital gains from the initial buyers to ensure the success of land leasehold housing at that time.

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