Pre-sale Rights Released Next Month... Dunchon Jugong Resale Remains Out of Reach

Package-like Real Transaction Obligation Abolition Bill Pending in National Assembly
If Not Passed Within the Year, High Possibility of Automatic Expiration

Next month, the resale restriction on pre-sale rights for Olympic Park Foreon in Gangdong-gu, Seoul will be lifted, but the mandatory residence regulation is hindering the market, causing expected confusion. As trading pre-sale rights has become virtually impossible, the concerns of pre-sale right holders who planned to cover part of the shortfall in the remaining payment by leasing out the property are deepening. If the remaining payment is not made by the scheduled move-in date in January 2025, the impact is also expected to affect construction companies that need to recover construction costs by collecting the remaining payments.

[Image source=Yonhap News]

According to the industry on the 14th, the pre-sale rights for Olympic Park Foreon (Dunchon Jugong) will be released to the market next month. This is because the government eased the resale restrictions on apartment pre-sale rights last April, reducing the maximum resale restriction period in the metropolitan area from 10 years to 1 year.

However, the outlook is that the pre-sale rights market will not easily activate. This is because the bill to abolish the mandatory residence obligation, which is paired with the resale restriction, has not yet passed the National Assembly. When the government eased the resale restrictions in January, it planned to partially amend the Housing Act to abolish the mandatory residence obligation of up to 5 years applied under the metropolitan area pre-sale price ceiling system. However, opposition parties opposed it, fearing it could encourage gap investment, and the bill has not passed the Land, Infrastructure and Transport Committee’s bill review subcommittee. Although resale of apartments is possible with the lifting of resale restrictions, failure to fulfill the mandatory residence period results in imprisonment for up to one year or a fine of up to 10 million won. Legally, resale is possible, but in reality, trading is impossible. According to the Ministry of Land, Infrastructure and Transport, as of last April, a total of 66 complexes and 43,786 households are subject to this mandatory residence obligation.

The possibility of the bill passing within this year is also uncertain. Even if the subcommittee review is completed, the bill must go through the full Land, Infrastructure and Transport Committee meeting, the Legislation and Judiciary Committee’s resolution, and the plenary session’s submission and approval process to be enacted. With the general election scheduled for April next year, if the bill is not processed within this year, the abolition of the mandatory residence obligation is likely to be nullified. This is because the bill will be automatically discarded with the end of the 21st National Assembly’s term and the conclusion of the National Assembly session in May next year.

Since ownership transfer registration can only be done after paying the remaining balance by the scheduled move-in date in January 2025, the concerns of pre-sale right holders are expected to deepen. An industry insider said, "Currently, pre-sale rights trading is practically difficult because the mandatory residence period of two years must be fulfilled," adding, "Especially, pre-sale right holders who planned to raise funds by leasing out the property are left with no options and their worries are deepening."

Since move-in rights without mandatory residence obligations have been traded at 1.8 billion won in actual transactions, some owners are expected to hold onto pre-sale rights without completing the remaining payment. Attorney Kim Yerim of Law Firm Simmok said, "If the remaining payment is not made, cancellation procedures should be initiated, but considering the market atmosphere and the complex’s image, it is highly likely that the pre-sale rights will be maintained by paying delay interest," adding, "There have been no cases of cancellation after signing the pre-sale contract."

There is also a forecast that the impact could affect construction companies that need to recover construction costs by collecting the remaining payments. To recover the construction costs already invested, the remaining payments at the time of move-in are necessary, and if payment is delayed, it could also burden the financial status of construction companies.

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