Affordable and Easy-to-Get Loans 'Shinhon Hope Town'... Why Are There Subscription Shortfalls? [Ryu Taemin's Real Estate A to Z]

Refund of up to 50% of price gains for newlywed hope towns priced over 300 million won
Supply focused on small units also limits demand... Mismatched with preference for medium to large units
Repeated failures in popular complexes... Difficult to exceed competition rate of 3 to 1

Uijeongbu Gosan S6 Block Newlywed Hope Town Bird's-eye View

[Asia Economy Reporter Ryu Tae-min] Among the 30,200 apartments subject to pre-sale starting in July this year, nearly half, or 14,000 units, are allocated to the Newlywed Hope Town, drawing significant attention from prospective applicants. However, despite the relatively low prices compared to market rates, some recently supplied Newlywed Hope Towns have experienced under-subscription, raising concerns that the project’s success cannot be guaranteed.

The Newlywed Hope Town was introduced in 2017 as a ‘customized housing for newlywed couples’ under the government’s housing welfare roadmap. Its biggest advantage is the affordable sale price, set at about 70-80% of the market price. Even in speculative overheated districts, buyers can receive loans up to 70% of the sale price, which is considered the greatest benefit for newlyweds with limited initial capital. On the surface, it is an attractive product for young newlywed couples with relatively low financial capacity.

However, the actual subscription results for Newlywed Hope Towns have been disappointing. Looking at the subscription results of 27 Newlywed Hope Town complexes supplied in the metropolitan area since 2018, 18 of them recorded single-digit subscription competition rates. Except for popular areas such as Suseo-dong in Seoul, Wirye New Town, and Gwacheon Knowledge Information Town, most competition rates did not exceed 3 to 1. In particular, the Newlywed Hope Towns recently supplied in Uijeongbu Gosan, Paju Wadong, and Yangju Hoecheon even faced under-subscription.

Up to 50% Market Price Gain Recovery Burden... Complaints of “Cramped” Due to Mainly Small Units

This outcome is interpreted to be due to several conditions attached to the Newlywed Hope Town. The exclusive loan product for Newlywed Hope Town includes a ‘repurchase condition’ clause. To receive a Newlywed Hope Town priced over 303 million KRW, applicants must mandatorily subscribe to an exclusive mortgage loan product. This product requires sharing 10-50% of the capital gains relative to the sale price with the Housing and Urban Fund when reselling the house later, depending on the loan amount, loan period, and number of children. In other words, the market price gains are not entirely the contract holder’s property. The mandatory residence period and resale restriction period are up to 5 years and 10 years, respectively.

The supply of mainly small-sized apartments is also cited as a cause of limited demand. Most Hope Towns consist of units sized 46㎡ (exclusive area), 55㎡, and 59㎡. While these sizes are manageable for a couple of two, there are complaints that they are somewhat burdensome for long-term residence while raising children. Especially the 46㎡ units, often with two rooms and subject to residence and resale restrictions, are considered burdensome.

Professor Seo Jin-hyung of Gyeongin Women’s University (President of the Korean Real Estate Society) said, "In Korea, housing is viewed not just as a place to live but as an investment and ownership asset, so profit-sharing systems do not align with public sentiment. Considering that newlywed couples will grow into 3-4 person households over time, it is necessary to consider expanding the supply area."