Housing Pension, Monthly Payments Increase with Rising House Prices but Stall in the Seoul Metropolitan Area

Slowdown in Increase of Housing Pension Subscribers from 18.2% to 14.3%
Average Monthly Payment and Housing Prices Rise Annually Due to House Price Increase
Experts Say "Housing Pension Advantageous Even if House Prices Rise, Should Be Actively Utilized"

[Asia Economy Reporter Song Seung-seop] Jeon Suhwan (58, pseudonym), who lives in an apartment in Guro-gu, Seoul (market price 810 million KRW), decided to wait and see before subscribing to the housing pension to prepare for retirement. If he subscribes with a lifetime payment method, he would receive 1.54 million KRW monthly without fail, but once the pension amount is set, it cannot be adjusted even if the house price rises later. Jeon said, "1.54 million KRW is not a small amount, but since house prices have soared under the current government, I hesitate because I think I might suffer a loss."

Recently, the subscription to housing pensions by homeowners in the metropolitan area has sharply slowed down. This is interpreted as a result of many people thinking, "Even if I subscribe, I will wait a little longer" due to expectations of rising house prices. It is also analyzed that the increase in houses exceeding the subscription conditions due to the rapid rise in housing prices is a cause.

According to the Korea Housing Finance Corporation on the 7th, the number of housing pension subscribers increased by a total of 10,172 last year, a 14.3% increase compared to the same period the previous year. This is a smaller increase than the previous year’s 10,982 (18.2%).

In particular, the number of new subscribers declined mainly in the metropolitan areas such as Seoul and Gyeonggi, where house prices soared during the Moon Jae-in administration. At the end of last year, the number of housing pension subscribers in these two regions was 23,223 and 27,037, respectively. This corresponds to 28.6% and 33.3% of the total, with the metropolitan area accounting for 61.9%.

However, since 2017, when the shares were 30.7% (15,292 people) and 34.3% (17,092 people), the numbers have been decreasing annually. Although the average monthly payment amounts were the highest at 1.39 million KRW and 1.07 million KRW respectively, their proportions have rather decreased.

Homeowners Hesitant About Housing Pension... Experts Say "It’s Advantageous to Use It Even If House Prices Rise"

The housing pension is a system where the state guarantees a pension to middle-aged and older people who own a house but have insufficient income. They can live in the house used as collateral and receive a stable income for life or a certain period.

The average monthly payment of the housing pension has been increasing every year thanks to rising house prices. The monthly payment, which was 989,000 KRW in 2017, rose to 1.03 million KRW by the end of last year. The average house price of subscribed homes also increased by about 10 million KRW from 297 million KRW the previous year to 307 million KRW. The average house price in 2017 was 287 million KRW.

The subscription criteria for the housing pension have been relaxed in various ways to secure new subscribers. In April last year, the subscription age was lowered from 60 to 55 years old, and at the end of last year, the eligible house price criteria changed from market price under 900 million KRW to official assessed price under 900 million KRW. Ownership of residential officetels was also allowed.

Some point out that if house prices continue to rise and the official assessed price is continuously adjusted to reflect reality, it will inevitably limit the number of housing pension subscribers. According to the ‘2021 Official Price Proposal for Apartment Complexes’ announced by the Ministry of Land, Infrastructure and Transport, the number of apartment complexes with an official assessed price exceeding 900 million KRW, which are ineligible for the pension, has exceeded 520,000 households. This is an increase of 210,000 households from 310,000 last year. In Seoul, 16% of apartment complexes exceed the 900 million KRW official assessed price, meaning one out of six homeowners cannot subscribe to the housing pension.

Officials from the Korea Housing Finance Corporation and pension experts still say that it is advantageous to utilize the housing pension for retirement preparation because of the guaranteed benefits and tax reduction effects. A representative from the Korea Housing Finance Corporation advised, "The housing pension guarantees a certain pension from the state even if house prices fall. Even if house prices rise, most of the increase goes to the children, so it is good to use it according to the situation."