30,000 Subscription Savings Accounts Gathered at Large-Scale Complex in 수도권: 'Tearful Mafi'

Pre-sale Rights Cheaper Than Sale Price... Spreading to Incheon and Gyeonggi
Interest Burden Increases, Selling at a Loss Due to Falling House Prices

[Asia Economy Reporter Onyu Lim] Even large-scale brand-name apartment complexes in the metropolitan area, which once attracted a flood of subscription savings accounts, have not escaped the ‘negative premium.’ In Incheon and Gyeonggi, pre-sale rights are being traded repeatedly at prices thousands of won cheaper than the original sale price. With successive interest rate hikes increasing the burden of interest payments and the real estate market stagnating, causing home prices to continue falling, it is interpreted that buyers are reluctantly engaging in ‘cut-loss sales.’

According to the Ministry of Land, Infrastructure and Transport’s real transaction price disclosure system on the 15th, on the 27th of last month, a pre-sale right for a 59㎡ (exclusive area) A-type unit on the 10th floor of Hillstate Prugio Juan in Juan-dong, Michuhol-gu, Incheon, was traded for 365.36 million KRW. The average sale price for this type was 375.5 million KRW, meaning it was sold for more than 10 million KRW less.

Hillstate Prugio Juan Perspective View

This apartment, developed by Hyundai Engineering & Construction and Daewoo Engineering & Construction, is a mammoth complex consisting of 2,958 households. It is built in the old downtown area of Incheon, where demand for moving into new buildings is high, and as a highly preferred brand-name large complex, it recorded a highest competition rate of 27 to 1 during the 2019 subscription, achieving great success.

However, as move-in approaches in June, cases of negative premiums where units are sold for less than the original sale price are increasing. A representative from nearby A real estate agency said, "Currently, 59㎡ lower-floor units are listed about 20 million KRW cheaper than the sale price," adding, "The rental market is also very weak, so those who cannot find tenants by move-in time will put their pre-sale rights up for sale at even lower prices."

In Yongin, a large-scale brand-name apartment complex that attracted 30,000 subscription accounts was traded at prices close to a negative premium. This is Hillstate Montero in Mohyeon-eup, Cheoin-gu, Yongin. During the subscription in February last year, it was sold out early by attracting 29,926 applicants, the highest number in Cheoin-gu. It is developed as a Hillstate brand town with 1,043 households in Block 1, 1,318 households in Block 2, and 1,370 households in Block 3. Being in a non-regulated area and having reasonable sale prices, it attracted very high demand.

However, on the 6th of last month, a pre-sale right for an 84㎡ E-type unit on the 4th floor in Block 3 was contracted for 475.3 million KRW. The average sale price was 478.1 million KRW, and considering it is a lower-floor unit, the sale price and actual transaction price are estimated to be similar. Currently, many buyers are putting their pre-sale rights on the market at prices about 15 million KRW cheaper than the sale price, so the actual transaction price is likely to fall further.

As the real estate market stagnation prolongs, negative premiums are spreading beyond local areas to the metropolitan area, and from small complexes to large complexes with thousands of households. With soaring interest rates increasing the burden of interest payments and concerns that home prices will fall even more sharply in the future, buyers seem to be willing to accept losses and sell their pre-sale rights at bargain prices.

Yang Ji-young, head of Yang Ji-young R&C Research Institute, said, "With the increase in interest rates, the burden of loan interest has increased, and buyers seem to be selling pre-sale rights for apartments that were popular at the time of subscription at prices lower than the original sale price," adding, "Going forward, the pre-sale rights market will polarize depending on brand and location."

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