[Beginner's Guide to Real Estate] Can You Own a Home in Seoul with Just 200 Million Won?… What Is a Shared Equity Housing?

Pay 25% upfront and acquire the remaining shares over 20-30 years
However, an initial rental deposit is also required

Applications possible up to 160% of dual-income average monthly worker income
But most allocations have a cutoff at 140%

Free trading allowed after resale restriction period
Likely a model sharing public benefits according to share ownership

[Asia Economy Reporter Lee Chun-hee] When you become a real estate reporter, friends sometimes suddenly message you on KakaoTalk. "How do I apply for a housing subscription?" "What is first priority?" For 2030 'Burin-i (Real Estate + Beginner)' who only have subscription savings accounts created by their parents when they were young, I am trying to create a guide.

On the 4th, the government announced through the August 4th Real Estate Measures that it will introduce public reconstruction and supply housing on idle sites such as Gwacheon, Sangam, and Seocho. This news also contains hope for Burin-i who had to give up their dream of owning a home due to the soaring apartment prices and sale prices in Seoul.

Specifically, it is the news of introducing the 'Equity Accumulation Type Sale Housing' to be piloted among public sale units. Simply put, when purchasing a public sale apartment, you initially pay only 20-25% of the sale price and move in first, then gradually buy the remaining 75-80% over a period of more than 20 years, similar to repaying a loan.

Currently, the Loan-to-Value (LTV) ratio limit for mortgage loans in speculative overheated districts like Seoul is set at 40%, so compared to the burden of having to prepare 400 to 500 million KRW within 3 years for most sales, the burden is significantly reduced. The government plans to introduce this in complexes with good residency conditions, such as public sale units in public reconstruction and newly secured public land.

For now, paying only 20% means 'my home'... but my home has a rental deposit?

Details such as the acquisition period of equity and the selection method of residents are expected to be specified and announced in the second half of this year. According to Seoul City's explanation, the initial equity acquisition is likely to be around 20-40%. At the time of initial equity acquisition, residents pay a rental deposit and live as tenants for a long period while gradually purchasing equity in installments.

The remaining equity acquisition period is expected to be 20-30 years. Seoul City plans to allow buyers to choose between 20 and 30 years if the high-priced housing standard is below 900 million KRW, and to set 30 years as the default for those exceeding 900 million KRW.

According to an example provided by Seoul City, it works like this: For a house with a total sale price of 500 million KRW, the immediate required cost is 225 million KRW. Setting the initial equity acquisition rate at 25% requires 125 million KRW for acquisition. The remaining 100 million KRW is the rental deposit for quasi-jeonse (long-term lease) residence until acquisition is complete. Additionally, a monthly rent of about 140,000 KRW will be charged.

Another important factor here is the LTV. Since it is a sale housing in Seoul, a speculative overheated district, an LTV of 40% applies. However, this applies to the initial acquisition amount of 125 million KRW, not the total sale price of 500 million KRW. In other words, unlike the usual interim payment loan of 200 million KRW when applying for a 500 million KRW house, only 50 million KRW can be borrowed. Therefore, at least 175 million KRW of self-funding is required.

If it is difficult to prepare a lump sum, the rental deposit can be lowered to 45 million KRW. In this case, the one-time funding amount decreases to 120 million KRW. However, the monthly rent increases to 310,000 KRW, which reduces disposable income.

After preparing this initial fund and moving in, the remaining 75% of the sale price will be paid in installments of 75 million KRW (15%) every 4 years. Paying five times over 20 years completes full home ownership. However, the amount to be paid is not just the principal. An additional interest rate similar to fixed deposit rates will be added. Seoul City explains this as "a measure considering the increased burden on buyers due to price rises at the time of sale conversion."

Possible even if annual income exceeds 100 million KRW... but practically difficult if monthly average income exceeds 140%

Not everyone can apply. Since it is public sale, income and asset criteria are expected to be applied based on existing public sale standards. Seoul City plans to allow applications for those with up to 150% of the previous year's urban worker monthly average income (160% for dual-income), real estate assets below 215.5 million KRW, and automobile assets below 27.64 million KRW. Theoretically, households with annual incomes up to 106.6 million KRW for 3-person dual-income households and 119.55 million KRW for 4-person households can apply.

However, these income criteria are close to the maximum limit, making it difficult to win a lottery. Seoul City plans to allocate 70% of the total units to special supply and 30% to general supply. Among the 70% special supply, 40% will be for newlyweds and 30% for first-time homebuyers. Among the 30% general supply, 20% will have a monthly average income limit of 130% (140% for dual-income). For dual-income households, this means 7.78 million KRW per month (93.32 million KRW annually) for 3-person households and 8.72 million KRW per month (104.6 million KRW annually) for 4-person households can apply.

Households exceeding these criteria can only compete for 10% of the units allocated for lottery with first-priority losers, making it a kind of false hope similar to the current system where existing homeowners can only apply for lottery-based subscriptions.

Anti-speculation measures? ... Possible resale restrictions and actual residence regulations

The advantage is that it can ensure long-term residential stability, but if anti-speculation measures such as a certain period of resale prohibition or mandatory actual residence period are applied, problems may arise. Even genuine buyers may need to relocate due to company transfers to provinces or overseas, or children's education issues during the 30-year period. If the period is set too long, the house may become a burden rather than an asset.

Seoul City states that after the resale restriction period, disposal will be possible even if equity purchase is not complete. The entire house can be sold to a third party at market price, and the payment will be shared with the public based on equity ratio. Unlike rental where majority equity holders can decide, sale requires unanimous consent of all equity holders. The public will only judge whether the price is normal and agree to the sale.

The resale restriction period is known to be about 10 years according to Seoul City. However, the government has proposed 20 years, and the final decision will be made through future negotiations.