[Q&A] "Reduced Newlywed Concentration Due to Expanded Pre-Subscription... Also Considering Measures for Jeonse"

Government Increases Pre-Subscription Housing Units by 101,000
Applies to Private Housing to Reduce Newlywed Concentration
Priority Public Rental Rights Granted to Local Residents in Taereung and Other Areas

Yoon Sung-won, the 1st Vice Minister of the Ministry of Land, Infrastructure and Transport, is giving the 16th Weekly Housing Supply Briefing at the Government Sejong Complex on the 25th. On this day, Vice Minister Yoon announced efforts to alleviate supply and demand instability for actual homebuyers by expanding the pre-sale subscription to advance the housing supply schedule. [Image source=Yonhap News]

The government has decided to expand pre-sale reservations through private sales within public housing sites and urban public housing complex projects. Accordingly, the pre-sale reservation volume will increase by 101,000 units from the original 62,000 units to 163,000 units. Among these, 71,000 units are in the metropolitan area.

The Ministry of Land, Infrastructure and Transport announced the plan to expand pre-sale reservations for public housing sites on the 25th, stating, "We are confident that this will be a great opportunity for households without homes to secure their own homes in excellent locations at affordable prices."

The newly added 101,000 units consist of 87,000 units from private projects within public housing sites and 14,000 units from the 3080 Plus projects (2·4 Supply Plan) such as urban public complex projects.

However, pre-sale reservations only bring forward the move-in reservation period for new apartments whose construction timing is uncertain, and do not actually increase the planned supply volume itself, leading to criticism in the market that this is a case of "changing the time of the day but not the amount" (Josam-mosa).

In particular, there is strong opposition from residents to public development, and the participation of private developers in pre-sale reservations is uncertain, so some analysts view the unilateral announcement of volume expansion as a reckless move.

Below is a Q&A with Yoon Sung-won, 1st Vice Minister of the Ministry of Land, Infrastructure and Transport, Kim Young-han, Director of Housing Policy at the Ministry, and other officials.

-Will the pre-sale prices for private housing be set at 60-80% of market prices like public housing? How will disagreements with the Housing & Urban Guarantee Corporation (HUG) over prices be handled?

▲When pre-sale reservations begin, the biggest concern for the public will likely be the sale price. We plan to establish a pre-estimated price verification committee within HUG and conduct on-site inspections by the Ministry of Land, Infrastructure and Transport to review prices. The sale price consists of land cost, basic construction cost, and additional costs. The land cost is clear as it is the price purchased from the Korea Land & Housing Corporation (LH), and the basic construction cost is announced annually by the government. The key issue is the additional costs, which will be verified by analyzing average figures and cases from private sales. We do not expect major conflicts.

-What is the progress on the 18,000 units out of the 32,000 new sites mentioned in last year's August 4th plan, excluding Gwacheon and Taereung? Some local residents and local governments oppose; will the plan proceed as is?

▲Other site plans are progressing without issues. At Yongsan Camp Kim, contamination cleanup and land acquisition procedures are proceeding smoothly, and LH's Yeouido site plan has been completed reflecting local opinions, focusing on job housing supply and expansion of living SOC. For the Public Procurement Service, agreement on temporary office relocation has been reached, and the Korea National Diplomatic Academy is preparing housing project approval based on development plans.

-In the first pre-sale reservation, 60% of the units were allocated to newlyweds. There were criticisms about concentration on newlyweds; will this issue be resolved in the upcoming pre-sale reservations?

▲The first pre-sale was public sales, so the special supply ratio for newlyweds was higher than in private sales. In this private project, the special supply ratio will be lower compared to public pre-sale reservations. Although the 2·4 plan's pre-sale volume is implemented by the public sector and should follow public allocation ratios in principle, since the originally planned private land supply sites through redevelopment have been changed to public project implementers, the special supply and general supply ratios similar to private land will be applied. We expect the concentration on newlyweds to decrease.

-Is there any incentive for residents of Nowon-gu in the Taereung district?

▲We plan to actively consider providing priority rights to local residents for a certain portion of public rental housing. During consultations with Nowon-gu, an agreement was reached to supply rental housing at a level around the legal ratio of 35%. This will be detailed during the district plan confirmation process.

-Among the pre-sale reservation units, are there any units allocated to one-homeowners under the condition of disposing of their existing home?

▲For private housing within public housing sites, the qualification criteria are basically the same as for the main sale. For the lottery system in the 2·4 plan volume, it is only provided to households without homes, so there are restrictions.

-Although over 100,000 pre-sale units are coming out, this does not actually increase supply. Can this be a fundamental solution to the supply shortage?

▲The total supply volume and supply plan the government is planning are at an all-time high level, and we believe it is sufficient and groundbreaking. Pre-sale reservations bring forward scheduled supply in a situation where the housing market is overheated and expectations of price increases dominate, effectively stabilizing the market by realizing future demand now.

-The expected participation rate for pre-sale on sale sites was announced as 50%; what is the basis for this calculation?

▲It is very variable, so various expected participation rates could be applied. Priority land supply is considered a very important incentive by the industry. Since we give points enough to influence land supply, companies planning to secure land and conduct projects are likely to participate in pre-sale reservations. We have neutrally estimated about 50% participation, which is a somewhat conservative standard.

-There are concerns that expanding pre-sale reservations might worsen the jeonse (long-term deposit lease) shortage. Are there countermeasures?

▲First, it is necessary to make various efforts to ensure the Lease 3 Act is well established. While ensuring that the jeonse measures announced last November proceed without issues, we will continuously monitor for any localized jeonse instability during the pre-sale process and devise necessary countermeasures.

-The volumes presented in the 2·4 plan are just simple planned volumes. Some view this as the government's wishful thinking. What is your response?

▲We feel quite disappointed by such media criticism. For the 2·4 plan urban complex project candidate sites, 13 locations have already secured consent from over two-thirds of residents. The consent rate is rising much faster than in other private redevelopment projects. Therefore, calling it merely the government's wish is somewhat misleading. For this pre-sale reservation as well, we have fully collected industry opinions and will strive to ensure that volumes exceeding the promised planned volumes are achieved without issues.

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