Why is the Affordable and Easily Loan-Approved 'Shinhon Huimang Town' Being Overlooked?

Citizens are waiting in line to apply at the pre-subscription office for Seongnam Bokjeong 1 District, a new residential site in Jangji-dong, Songpa-gu, Seoul. (Photo by Yonhap News)

[Asia Economy Reporter Ryu Tae-min] Among the 30,200 apartments subject to pre-sale subscription, it has been revealed that the subscription for 14,000 units of the newlywed hope town, which accounts for nearly half, recently faced under-subscription. Although the newlywed hope town offers prices lower than market value, it is being shunned by newlywed couples due to the requirement to share future capital gains with the government and the limited size of the units.

The pre-sale subscription for the newlywed hope towns in Gwacheon Juam District and Siheung Hajung District, which accepted applications from the 1st to the 3rd, recorded under-subscription with only 1,297 applicants for 2,172 units. This contrasts sharply with the public sale special supply, which had 24,965 applicants competing for 890 units, resulting in a high competition rate of 16.7 to 1.

Among the seven housing types in the newlywed hope town, six types failed to meet the local recruitment quota. Even the only housing type that fully met the recruitment quota, the 55㎡ (exclusive area) unit in Siheung Hajung, barely avoided under-subscription with a competition rate of 1.1 to 1. As a result, the remaining units will be allocated to demanders from other metropolitan areas.

In particular, the Gwacheon Juam District, which borders Seocho-gu in Seoul and is considered a 'quasi-Gangnam area,' saw only about half of the 1,421 units in the newlywed hope town subscribed, with just 730 applicants.

The newlywed hope town was introduced in 2017 as a ‘customized housing for newlywed couples’ under the government’s housing welfare roadmap. Its biggest advantage is the affordable sale price, set at 70-80% of the market price. Even in speculative overheated districts, loans of up to 70% of the sale price are available, which is considered the greatest benefit for newlywed couples with limited initial capital. On the surface, it is an attractive product for young newlywed couples with relatively low financial capacity.

However, the low subscription results for the newlywed hope town are due to several attached conditions. The exclusive loan product for the newlywed hope town includes a ‘repurchase condition’ clause. To receive a newlywed hope town unit priced over 303 million KRW, applicants must mandatorily subscribe to an exclusive mortgage loan product. This product requires sharing 10-50% of the capital gains, depending on the loan amount, loan period, and number of children, with the Housing and Urban Fund when reselling the house later. Thus, the capital gains are not entirely the contract holder’s. The mandatory residence period and resale restriction period are up to 5 years and 10 years, respectively.

Gwacheon Juam District Newlywed Hope Town 46㎡ (Exclusive Area) Housing Type Floor Plan

The supply of mainly small-sized apartments is also cited as a cause of limited demand. Most hope towns consist of units sized 46㎡, 55㎡, and 59㎡. While this is not a big issue for a couple living alone, complaints arise that it is somewhat difficult to raise children later. Especially, the smallest 46㎡ unit consists of two rooms and carries a heavy burden due to the mandatory residence period and resale restrictions.

Professor Seo Jin-hyung of Gyeongin Women’s University (President of the Korean Real Estate Society) said, "In Korea, housing is regarded not just as a place to live but as an investment and ownership asset, so the profit-sharing system does not align with public sentiment," adding, "It is necessary to consider expanding the supply size, taking into account that newlywed couples will grow into 3-4 person households over time."

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