[Practical Finance] The Emptiness and Frustration of Renting in Your 30s... Should You Buy a House or Not?

Special Supply, Loans, Jjubjub... Consider and GO!
Start by Checking the Possible Funding Range... Special Supply Is an Opportunity If Income Requirements Are Met

[Image source=Yonhap News]

[Asia Economy Reporter Kim Hyemin] Kim (33), who has been living in a rented house in downtown Seoul for four years since marriage, has recently been losing sleep over thoughts of buying a home. As peers gradually start owning their own homes, she feels left behind. She also needs a stable home for her growing child. While she thinks she might need to go all-in to buy a house now, the government's warnings that "this is the peak" keep shaking her resolve day after day. "I feel a sense of deprivation. Should I buy a house even now?"

Experts advise that if you are a non-homeowner from a low-income background intending to live in the house yourself, you should not hesitate to purchase a home. However, they emphasize the importance of carefully assessing your financial capacity without overextending loans. Besides simply buying an older apartment, it is also important to explore various opportunities to benefit from policy advantages. The three key terms are ‘special supply’, ‘loan limits’, and ‘non-priority subscription’.

◆ Utilizing Special Supply... The Most Affordable Way to Secure a New Home = The most recommended method is to use the ‘special supply’ system in apartment sales. Yeokyung Lee, Senior Researcher at Real Estate 114, said, "You can acquire a new apartment at a lower cost, and you have more time to prepare funds, which reduces the burden," advising to check whether you qualify for special supply and your chances of winning.

Special supply is a system that allows applicants to receive apartment allocations without competing with general subscription applicants, whose chances depend on points. Currently, for public housing priced at 900 million KRW or less, 85% of the total units under 85㎡ (exclusive area) are allocated as special supply. For private sales, this ratio is 50%. If you have been married for less than seven years, you can consider the ‘newlywed special supply’ since up to 30% of special supply units (for public sales) are allocated to newlyweds.

However, the newlywed special supply requires meeting income criteria. Seventy percent of the allocated units are given priority to those with income at or below 100% of the urban worker average monthly income (120% for dual-income households). For dual-income households, the monthly average income must not exceed 7,236,192 KRW for households of three or fewer, and 8,513,046 KRW for households of four or more. If income exceeds these thresholds, support is limited to a maximum of 9,648,256 KRW for three or fewer and 11,350,000 KRW for four or more, based on dual-income standards. All figures are pre-tax, and in case of competition, having minor children qualifies you for first priority.

If you have never purchased a home before, you can also aim for the ‘first-time homebuyer special supply.’ However, this system also imposes asset restrictions along with income limits. Real estate assets must be valued at 215.5 million KRW or less, and vehicle value must be 34.96 million KRW or less. If you have worked long-term at a small or medium-sized enterprise (SME), you should look into the ‘SME Long-term Employee Institutional Recommendation’ special supply. If you have worked at an SME for more than five years and are a non-homeowner, you can apply. About 2% of general sales units are allocated to this, and it has the advantage of relatively low competition. Longer employment duration increases your chances of winning.

◆ If You Shift to Older Apartments... Start with a Financial Plan = If you do not qualify for special supply or give up on subscription, and decide to buy an older apartment, you should first examine your financing options, including loans. You need to carefully calculate the maximum housing price you can afford and then decide on the location and property accordingly.

Experts advise taking advantage of eased loan regulations for non-homeowner low-income individuals. The government recently announced measures to relax the Loan-to-Value ratio (LTV) for policy financial products like the Bogeumjari Loan and bank mortgage loans. Accordingly, the Bogeumjari Loan allows up to 360 million KRW for homes priced at 600 million KRW or less, and bank LTV allows up to 400 million KRW for homes priced at 900 million KRW or less. For example, if you buy a 700 million KRW home, you can now borrow about 120 million KRW more than before.

Senior Researcher Yeokyung Lee said, "Prices have risen significantly compared to the past, so it may feel like a bubble, but even if prices adjust somewhat, it won't have a big impact because the purpose is for actual residence," adding, "In the long term, housing prices will inevitably rise." However, she cautioned against borrowing excessively to buy, considering the possibility of rising loan interest rates.

◆ Non-priority Subscription and Lottery Units... Don’t Miss These Opportunities, Stay Consistent = So-called ‘jupjup’ (picking up leftover units) through non-priority subscription and lottery units is a niche market for people in their 30s.

The lottery system selects winners randomly. For homes over 85㎡ in speculative overheated districts, 50% of units are allocated by lottery, and in overheated subscription areas, 70% are lottery units. For units under 85㎡, 25% in overheated subscription areas and 60% in non-regulated areas are allocated by lottery. In non-regulated areas, 100% of units over 85㎡ are allocated by lottery.

Although the conditions are less strict, making competition higher than for special supply or point-based units, there are still opportunities. Seventy-five percent of lottery units go to non-homeowners. However, since these are medium to large units, you must carefully assess whether you can afford the sale price. Also, some areas require residency conditions, so you should plan thoroughly, including moving your residence before applying.

Non-priority subscription refers to accepting new applications for leftover units after the initial occupant recruitment, due to cancellations or disqualifications. Anyone aged 19 or older residing in the apartment’s metropolitan area can participate.

In the second half of this year, ‘jupjup’ units are expected to appear in prime complexes like Gwacheon Xi and Gwacheon Weverfield, which previously sparked a ‘lottery frenzy.’ Although the exact scale is not confirmed, the industry expects about 20 units to be available. On the 11th, a non-priority subscription for five units will be held at The H Xi Gaepo in Gangnam-gu, Seoul. The 84㎡ units are priced at 1.4176 billion KRW, and winning could yield a market price difference of about 1.5 billion KRW.

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