[Real Estate AtoZ] Buying a Home Without a Cheongyak Savings Account? 'Bunyang Yebijutaek' Bidding Soars

#Eunpyeong-gu 'ePyeonhansesang Baekryeonsan' (Eungam 4 District) reconstruction association announced the sale of 2 reserved units on the 11th. Bidding will proceed until the 15th, with all units having an exclusive area of 84㎡ and a minimum bid price of 925 million KRW. This minimum bid price is even higher than the highest actual transaction price. The ePyeonhansesang Baekryeonsan 84㎡ unit was last traded at the highest price of 845 million KRW (5th floor) on the 4th of last month.

#Gaepo 1-dong Jugong Apartment (The H Firstier I-Park) association released 12 reserved units on the 13th, all with an exclusive area of 59㎡, priced between 2.2 billion KRW and 2.4 billion KRW. Considering that a pre-sale right for the same exclusive area apartment was traded at the highest price of 2.25403 billion KRW (12th floor) on the 19th of last month, the set minimum bid prices are similar to or higher than the highest actual transaction prices.

[Image source=Yonhap News]

As the housing market shows signs of recovery, the value of reserved units, which were previously overlooked, is rising again. Recently, with the change in market sentiment, reserved units priced higher than the highest actual transaction prices have been appearing one after another.

In fact, until early this year, reserved units in the Gangnam area struggled to sell even after discounting prices by several hundred million KRW. For example, 'Daechi L' in Daechi-dong, Gangnam-gu, announced the sale of reserved units four times since April last year but failed to find buyers, resulting in repeated failures. Eventually, after lowering the initial bid price by 400 to 500 million KRW or more, they succeeded in disposing of the reserved units on the fifth announcement.

What is a 'Reserved Unit Bid'?

Reserved units refer to housing units kept in reserve by redevelopment or reconstruction associations in case of omissions or errors in the allocation of units to association members, to prepare for potential future issues. Typically, about 1% of the total number of households is reserved, but usually, 0.2% to 0.4% are kept and sold when move-in approaches.

Since there are no specific restrictions on bid prices, associations set bid prices close to market prices to secure profitability. The highest bidder based on the minimum bid price set by the association wins the bid. Reserved units can be bid on by any Korean citizen aged 19 or older without a subscription savings account, making the entry barrier low, and they are not subject to resale restrictions, allowing resale. Generally, when purchasing a new home, buyers cannot choose their preferred unit number, but reserved units allow bidders to specify the unit they want.

Need for Short-Term Fundraising... Risk of Losing Deposit

However, since reserved unit bids require raising funds in a short period, a thorough financial plan is necessary. Reserved units usually come up for sale near the move-in date, so the payment period is often short, typically 1 to 2 months. Moreover, for reserved units that have not yet been registered (unregistered preservation), it can be difficult to obtain interim payments or mortgage loans, causing financial challenges.

In particular, to bid on reserved units, bidders must place a deposit of 5-10% of the minimum bid amount. This deposit is non-refundable after winning the bid. If the contract is canceled due to non-payment of the balance, the bid deposit is forfeited to the apartment association. Since there is a risk of losing the deposit, careful consideration is required before bidding.

Yeonghee Yeo, Senior Researcher at Real Estate R114, said, “There is an expectation of a rebound in major locations within Seoul, and in complexes with good locations, subscription competition rates are rising, changing the atmosphere and increasing the value of reserved units. However, since the prices are high and the balance must be paid in cash within a short period, cautious investment is necessary.”

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