"If Move-in Delayed, Jeonse Refugees"...Pre-sale Subscription, Concerns Amid Expectations

Expectations for Homeownership and Concerns Over Jeonse Refugees Coexist
Worries About Delays Due to Difficult Land Compensation Procedures
LH Trust Recovery and Organizational Restructuring Remain Unclear
Ministry of Land, Infrastructure and Transport Announces Policy to Complete Compensation Next Year

Citizens visiting Namsan in Seoul looking at the Gangnam area of Seoul [Image source=Yonhap News]

[Asia Economy Reporter Moon Jiwon] One of the biggest problems with the pre-sale subscription system is that the waiting period for moving in can become indefinitely long. Since pre-sale subscriptions select residents 1 to 2 years ahead of the main subscription to alleviate housing insecurity for those without homes, if subsequent schedules are delayed, people may have to wander through rental homes for nearly 10 years. Because winners of the pre-sale subscription must maintain their non-homeowner status until moving in, there are many concerns that they could inadvertently become 'jeonse refugees' (rental refugees).

According to the real estate industry on the 15th, as the first pre-sale subscription schedule begins in earnest, among genuine non-homeowner buyers, there is a coexistence of hope for 'owning a home' and concerns about remaining as rental refugees for an indefinite long period. Recently, jeonse prices have surged mainly in the metropolitan area, and the conversion from jeonse to monthly rent is accelerating, raising concerns that the housing burden on those waiting for subscriptions could increase. In Seoul, apartment jeonse prices have been rising for 106 consecutive weeks until last week.

In Incheon Gyeyang, where the resident recruitment announcement is imminent, move-in is planned for 2025, but there are predictions that land compensation work will be delayed for a long time due to difficulties. Due to landowners' opposition demanding a reappraisal of land valuation, the land compensation rate is only in the 60% range. Considering that even after land compensation is completed, it can take 3 to 5 years until move-in, depending on the extent of land compensation delays, there could be endless psychological torture waiting for move-in.

Hanam Gyosan, a 3rd phase new town, has not yet started the survey of obstacles due to resident opposition, and Namyangju Wangsuk is also expected to experience delays in land compensation due to increased conflicts between Korea Land and Housing Corporation (LH) and residents.

In particular, LH, which plays a leading role in the development of 3rd phase new towns, has not yet completed its organizational restructuring after controversies over land speculation by its executives and employees, creating significant uncertainty. The government planned to finalize the restructuring plan by August and accelerate housing supply, but with the presidential election next year, the complex interests between politics and regions make delays highly likely. Meanwhile, opposition from landowners and original residents in the new town sites is intensifying.

A man in his 30s, Mr. A, preparing for pre-sale subscription in Hanam Gyosan, said, "Hearing that the land compensation process is delayed, even if I win the pre-sale subscription, I worry about when I can move in," and added, "Jeonse prices are rising too steeply, and I feel I will get exhausted waiting to move in."

The Ministry of Land, Infrastructure and Transport states that it will do its best to speed up the process to prevent a repeat of past pre-sale subscription cases where move-in was indefinitely delayed and many winners gave up moving in. A ministry official said, "For the 3rd phase new towns, we plan to complete compensation in 2022, start site development construction, and sequentially conduct the main subscription in 2023."

Lee Eunhyung, a senior researcher at the Korea Construction Policy Institute, said, "There will be limits to calming the current real estate market heat and expecting market stabilization effects through new town pre-sale subscriptions," adding, "It is difficult to satisfy all housing demand in the market with pre-sale subscription quantities, and winners must maintain non-homeowner status and live in rentals."

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