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[Asia Economy Reporter Donghyun Choi] 'Pre-sale Rights vs Move-in Rights'

What are the differences between pre-sale rights and move-in rights, which have seen increased demand due to strengthened resale restrictions? While both serve as guarantees for moving into a new apartment, they differ significantly in terms of registration status, initial investment costs, and taxation.

Pre-sale rights arise when a successful applicant for a general apartment sale pays the deposit. Holding pre-sale rights does not immediately grant ownership of the property. Full ownership is only secured after paying the interim and final payments and completing the ownership transfer registration.

Move-in rights are the rights of union members in reconstruction or redevelopment projects to move into newly built homes after demolishing their existing ones. In redevelopment, owning either land or a house qualifies one as a union member and secures move-in rights, but in reconstruction, ownership of both land and building is required to obtain move-in rights. Move-in rights are confirmed once the management disposition approval, a critical milestone in the maintenance project, is finalized.

There is a difference in initial investment costs between pre-sale rights and move-in rights. Pre-sale rights require paying a deposit equivalent to 10-20% of the sale price, making the initial cost relatively low. In contrast, move-in rights granted to union members are priced by including the assessed value of the existing building, settlement payments, and premiums (in the case of successor union members), resulting in higher initial investment costs. A downside is that acquisition costs must be paid within a relatively short period, similar to purchasing an existing home. However, move-in rights are generally cheaper than pre-sale rights based on total transaction value and come with various benefits provided free of charge by the construction company. Typical benefits include relocation expenses and balcony expansions. Additionally, move-in rights are unrelated to subscription savings accounts or subscription points and grant the right to choose the floor, orientation, and building of the new apartment before general sales, increasing the chances of securing premium floors.

Generally, pre-sale rights and move-in rights traded in the market carry premiums, mainly determined by the location of the new apartment, surrounding market prices, and remaining move-in days. When looking solely at the sale price excluding these premiums and various costs, union member sale prices are typically lower than general sale prices. This is because union members bear risks such as increased financial costs due to project delays and additional contributions arising from unsold units. However, due to the government's stringent price controls, there is a possibility of a 'price inversion' phenomenon in some Gangnam area complexes, where general sale prices become cheaper than union member sale prices.

What about taxation? Pre-sale rights are included in the number of houses when applying for loans or subscriptions but are not considered houses for tax purposes when determining multi-homeowner status. Only after paying the final payment and completing registration upon completion are they regarded as houses, subjecting them to holding taxes. However, since 2021, when capital gains tax surcharges apply to multi-homeowners selling houses in regulated areas, pre-sale rights are also counted as houses for taxation. On the other hand, move-in rights are classified as houses under the Housing Act and are subject to the same regulations as homeowners. Holding move-in rights prohibits mortgage loans when purchasing a new house in regulated areas. Capital gains tax is imposed on selling move-in rights worth over 900 million KRW, depending on the holding period. If a single-homeowner purchases move-in rights, they become a two-home household, increasing holding tax burdens such as property tax and comprehensive real estate tax.