Finally, Apartments Under the Price Ceiling System Are Coming

End of This Month: Seocho Jaileune and Godeok Artes Misojium Launch
First After July Grace Period Ends

Seocho Sale Prices at Two-Thirds Level... Solo Complexes Under 100 Units Considered

[Asia Economy Reporter Lee Chun-hee] At the end of this month, three months after the implementation of the private land sale price ceiling system, apartments subject to the price ceiling will be introduced for the first time in Seoul. However, all the complexes being sold this time are 'solo' complexes with fewer than 100 households, and many large projects have postponed sales due to the impact of the price ceiling system, raising concerns that the supply shortage will continue for the time being.

According to the industry on the 15th, two complexes subject to the price ceiling system, 'Seocho Jaileune' in Seocho-dong, Seocho-gu, and 'Godeok Artes Misojieum' in Sangil-dong, Gangdong-gu, are scheduled for general sale at the end of this month. Seocho Jaileune is a reconstruction of Nakwon and Cheonggwang Yeonrip, and Godeok Artes Misojieum is a reconstruction of Byeoksan Villa.

Both complexes announced the resident recruitment notice on the 8th, but Seocho Jaileune will accept first-priority subscriptions on the 19th, and Godeok Artes Misojieum on the 20th. The announcement dates for the winners are also different, on the 27th and 29th respectively, allowing for overlapping subscriptions. However, both are not general reconstruction projects but rather street housing maintenance projects, so they were not subject to the application exemption when the price ceiling expansion policy was announced last year.

Affordable Sale Prices vs. 'Solo' Apartments, Resale Restriction Regulations

Since the price ceiling system is applied, the sale prices of both complexes are evaluated to be cheaper than the surrounding market prices. The average sale price per 3.3㎡ is about 32.52 million KRW for Seocho Jaileune and about 25.69 million KRW for Godeok Artes Misojieum.

In the case of Seocho Jaileune, during the high-price sale review process by the Housing and Urban Guarantee Corporation (HUG), most surrounding new apartments were priced at about 48.91 million KRW per 3.3㎡, so the price is about two-thirds of that. For Godeok Artes Misojieum, it is known that the sale price was set even lower than the price initially determined by the Songpa-gu Sale Price Deliberation Committee after the Korea Real Estate Agency requested a re-evaluation of the land cost appraisal.

For the 84㎡ (exclusive area) unit of Godeok Artes Misojieum, priced between 836 million and 866 million KRW, considering that the recent actual transaction prices of nearby reconstruction complexes such as Godeok Gracium and Godeok Arteon have exceeded 1.5 billion KRW for the same area, it is evaluated as about half the price. Another advantage is that the loan-to-value ratio (LTV) for mortgage loans is recognized up to 40% due to the low sale price.

However, it should be noted that both complexes are small-scale solo complexes with fewer than 100 households. Seocho Jaileune has 67 households, and Godeok Artes Misojieum has 100 households, with only 35 and 37 units available for general sale, respectively. The housing types supplied in Godeok Artes Misojieum are ▲24 units of 84㎡ ▲13 units of 59㎡. Seocho Jaileune supplies only small units: ▲17 units of 50㎡ ▲7 units of 59㎡ ▲11 units of 69㎡.

Local real estate agencies predict that the preference for these complexes will be lower compared to large complexes, so the market price after moving in is likely to be relatively low. In fact, small-scale complexes in Seoul that previously went through subscription did not attract much attention despite being subject to the price ceiling system. For example, 'Balkuchine House' in Gonghang-dong, Gangseo-gu, which held a subscription in June, had all 45 units unsold, leading the company to undertake a full resale.

Prospective subscribers should also keep in mind various regulations related to the application of the price ceiling system. Both complexes prohibit resale for 8 years from the announcement date of the winners. Considering the construction period of about 3 years, trading will be impossible for about 5 years after moving in. Winners are also restricted from reapplying for 10 years.

The obligation to reside does not apply. Although the amended Housing Act, which imposes a residence obligation period of 5 years if the sale price is below 80% of the nearby area's price and 3 years if it is between 80% and 100%, has been promulgated, a grace period applies until February next year.