[Asia Economy Reporter Lee Chun-hee] The high-priced housing price review system implemented by the Housing and Urban Guarantee Corporation (HUG) to lower sale prices has actually caused huge market price gains for buyers, further fueling overheating in the subscription market.
On the 19th, Kim Hoe-jae, a member of the National Assembly Land, Infrastructure and Transport Committee from the Democratic Party of Korea, revealed that among 219 complexes where prices were lowered due to HUG's high-priced housing price review, the market prices of 8 completed complexes all increased about twofold compared to the sale prices.
In particular, the 'Boramae SK View' in Shingil New Town, Yeongdeungpo-gu, was sold at 19.46 million KRW per 3.3㎡ in May 2017, but its current market price has soared to 41.71 million KRW, a 2.1-fold increase. Even the complex with the lowest increase rate, 'Bangbae Art Xi' in Seocho-gu, rose from 37.98 million KRW to 60.07 million KRW per 3.3㎡, a 1.6-fold increase.
The government has managed the sale prices of 219 complexes since August 2016, starting with Gangnam and Seocho districts, to curb the spread of high prices due to overheating in the housing market and to manage HUG's guarantee risk. Under current law, pre-sale requires a sale guarantee, which HUG has monopolized so far, effectively controlling sale prices through the issuance process of HUG's sale guarantee certificates.
Concerns about "lottery subscriptions" have been raised since the early days of this high-priced housing price management system. Instead of lowering surrounding market prices through price control, prices tend to surge sharply following surrounding market prices during subsequent sales. While there is an advantage for non-homeowners to purchase at a low price, the low sale price guarantees a market price gain of several hundred million KRW if one wins the subscription, attracting numerous subscription accounts and overheating the market, which leads to a vicious cycle of further surrounding market price increases.
Assemblyman Kim Hoe-jae stated, "During the past financial crisis, HUG had to make substitute payments of about 2.36 trillion KRW from 2008 to 2010 due to unsold high-priced apartments guaranteed by HUG," and added, "The measures introduced by HUG to reduce losses are now resulting in lottery subscriptions." He further pointed out, "With the expiration of the sale price ceiling system grace period last July, the system will be implemented in 18 out of 25 districts in Seoul, which also raises concerns about lottery subscriptions," and emphasized, "Special measures are needed to prevent overheating in the subscription market."
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