[Real Estate Investment] Cold Wave in the Subscription Market... Focus on 'Pre-sale Rights and Quick Sales'

Need to Establish 2023 Strategy Amid Cold Wave in Subscription Market
Breakthrough for ‘Mapi’ Pre-sale Rights Ahead of Move-in
Attractive Local Superior Areas with Lifted Speculation Zones
Chance for Existing Homeowners through ‘Lottery System’

[Asia Economy Reporter Ryu Taemin] "If you win the subscription, you will gain lottery-level capital gains." This has long become a thing of the past in the recent subscription market. This is because the sale prices have repeatedly fallen as the housing market has frozen, despite the increase in the pre-sale prices. Most of the subscription complexes about to be launched recently have good locations but high pre-sale prices, or conversely, complexes with low pre-sale prices are not evaluated as having good locations.

If it were expected that sale prices would soar vertically like last year, many buyers would jump into subscriptions for long-term investment even if somewhat expensive, but in the current downturn, even this is difficult. Park Jimin, head of Wolyong Subscription Research Institute, explained, "The pre-sale prices of adjacent cities such as the outskirts of Seoul, Gwangmyeong, Suwon, and Anyang exceed 1 billion KRW for exclusive 84㎡ units," adding, "If expectations for price increases are high, subscription demand would be strong even if somewhat expensive, but it is difficult to approach easily when the outlook is negative like now."

In the metropolitan area, focus on pre-sale rights and urgent sales... In non-metropolitan areas, aim for ‘premium locations’ subscriptions

That does not mean there are no places worth investing in. Complexes about to open subscription have high pre-sale prices, but those that have already finished subscription and are about to move in have relatively low pre-sale prices. Experts advise that buying the pre-sale rights of these complexes at a low price in the metropolitan area can be a good strategy.

Especially, as the sharp rise in base interest rates deepens the transaction cliff phenomenon, many pre-sale right holders who gave up moving in because they could not dispose of existing houses are selling pre-sale rights at low prices. Recently, there have been listings that do not receive premiums at all, called ‘no premium’ (mu-pi), or even sell below the pre-sale price at a loss, called ‘minus premium’ (ma-pi). Park Jimin explained, "The pre-sale prices from 1-2 years ago were lower than now, and premiums have disappeared, so aiming for pre-sale rights allows you to purchase a house cheaply," adding, "Moreover, you can move in earlier, which is an additional advantage."

If you are still considering applying for subscription, Park advises to carefully look for complexes with low pre-sale prices. He said, "There is a trend of many urgent sales at about 30% below market prices in nearby complexes, so the pre-sale price should be similar or slightly lower to hold up well," adding, "It would be easier to compare if you base it on sale prices from 2019 or early 2020."

In non-metropolitan areas, applying for subscriptions in areas classified as ‘premium locations’ can also be a good strategy. This year, the government has significantly eased or lifted speculative and adjustment area designations for regions other than Seoul and key metropolitan areas such as Gwacheon, Seongnam (Bundang, Sujeong), Hanam, and Gwangmyeong in Gyeonggi Province. As a result, the qualification criteria for subscription in major local areas previously designated as speculative areas have been removed. In other words, not only residents of those areas but also prospective subscribers living in nearby regions now have first-priority subscription eligibility.

For 2030 generation with low scores, ‘lottery system’ is an opportunity

Youth dreaming of owning a home should consider the subscription lottery system starting next year. The government is adjusting the ratio between the point-based system and the lottery system by housing size, increasing opportunities. From April next year, the lottery system ratio will be increased for small to medium-sized housing, which has high demand from young households, while the point-based system ratio will be increased for large housing, which has high demand from middle-aged and older households.

Even homeowners are not completely barred from applying for subscriptions. The point-based system is supplied only to non-homeowners, so it is impossible for homeowners, but the lottery system allows one-homeowners to apply. In regulated areas such as speculative overheated zones and adjustment target areas, one-homeowners can win in 25% of the lottery system quota. However, winners must promise to dispose of their existing home within six months. In non-regulated areas, subscription applications are possible without disposing of existing homes. Especially in non-regulated areas, there is a considerable amount of lottery system quota even for units under exclusive 85㎡.

Subscription systems can be advantageous for young generations who currently lack cash liquidity. Unlike the sales market where the balance must be paid quickly, subscriptions allow a long period until all intermediate and final payments are made after winning. For the 2030 generation, who are expected to increase income in the future, this can be a mid- to long-term opportunity to own a home.

Recently, as interest burdens have increased due to consecutive interest rate hikes, some complexes offer interest-free intermediate payment loans or provide subsidies. However, experts advise caution against rash subscription to such complexes. Jeong Jiyoung, CEO of I’m Happy and a subscription expert, said, "These services can reduce interest burdens, but there is a risk that the complex may remain unsold or that there may not be enough actual demand when selling later," adding, "Complexes offering interest-free intermediate loans, discounted sales, or fixed contract deposits tend to be unpopular due to location or other reasons, so caution is needed."

Subscription savings accounts are not burdensome... prematurely canceling may cause missed opportunities

There is a long-standing saying: "If you have money to eat, maintain your subscription savings account." Maintaining the subscription savings account increases the points and thus the chance of winning. If you cancel the subscription savings account, the subscription period is lost and you have to start accumulating again from scratch. Especially for public sales, winners are selected based on the subscription deposit amount or number of payments after maintaining a non-homeowner period of three years, making it even more necessary.

CEO Jeong Jiyoung said, "Most subscription savings accounts do not have large sums of money, so unless you are in an urgent financial situation, it is more advantageous to maintain it," advising, "If you think of it as a kind of savings account, it will be easier on your mind." Park Jimin also advised, "Since the subscription market is unpredictable, it is more advantageous to keep the subscription savings account for life to seize opportunities," adding, "Reducing the monthly deposit amount to a small sum can lessen the burden."

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