"Pre-sale Boom vs. No Homeownership"… Growing Skepticism Over the 'Price Ceiling System for Pre-sale'

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[Asia Economy Reporters Moon Jiwon, Ryu Taemin] As the subscription market overheats, skepticism about the ‘uselessness of subscription savings accounts’ has arisen, leading to growing doubts about the ‘Price Ceiling System’ that created this structure. Instead of the original intention to stabilize housing prices by setting the sale price lower than the market price, side effects such as ‘lottery subscriptions’ and ‘generational conflicts’ are increasing, prompting calls for alternatives.

According to Korea Real Estate Board’s Subscription Home as of the end of December last year, the number of comprehensive housing subscription savings account holders was 25,559,156. This is an increase of 1,803,055 in one year, marking the largest rise ever except for 2015. Because new apartments could be purchased much cheaper than market prices due to the Price Ceiling System, people of all ages rushed to subscribe.

The problem is that there is a limit to housing supply, so only a few people can win the lottery subscription. Demand for new apartments is growing, but under the current government’s regulatory tightening, the supply of quality apartments in urban areas is decreasing, and prices of existing apartments are soaring, intensifying conflicts between young and middle-aged groups, as well as between high-score and low-score applicants over the limited supply.

Experts argue that the framework of the Price Ceiling System itself needs to be changed. Shim Gyo-eon, professor of real estate at Konkuk University, said, “The price gap has become so large that the subscription market has turned into a ‘government-promoted gambling arena.’ I don’t know if it’s a fair policy that some people hit the jackpot through subscriptions while others find it difficult to own a home for life.”

A plan to share the huge market price gains that all successful subscribers enjoy with the public is emerging as an alternative. Lim Jaeman, professor of real estate at Sejong University, emphasized, “Since it is difficult to abolish the Price Ceiling System entirely, it is necessary to introduce resale-condition housing where market gains are shared between the public and the subscribers.” Resale-condition housing requires selling the subscribed apartment back to the public to reduce market gains.

Seo Jin-hyung, professor of business administration at Gyeongin Women’s University, also said, “It is time to consider introducing a bond bidding system that mandates the purchase of national housing bonds.” He explained that such recovery could secure resources for public purposes such as permanent rental housing supply. By requiring subscribers to purchase bonds and partially recover gains, the effective sale price would rise, reducing speculative demand.

Since increasing apartment supply in Seoul and the metropolitan area cannot meet all demand, there is also a need to activate redevelopment projects to disperse demand concentrated on subscriptions. Ahn Myung-sook, head of the Real Estate Investment Support Center at Woori Bank, explained, “If reconstruction is difficult, remodeling should be promoted so that people can live in the homes they want, reducing the need to apply for subscriptions.”

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