Preemptive Expansion of Early Subscription as a Last Resort... Market Says "Just a Josaengmo-sa"

[Image source=Yonhap News]

[Asia Economy Reporter Kangwook Cho] As the government plans to stabilize the real estate market by increasing the volume and scope of this year’s ‘pre-subscription’ housing, attention is focused on whether it can calm the ‘panic buying’ caused by the rapid rise in housing prices. However, the market criticizes the policy as a mere superficial ‘Josam-mosa’ (a Korean idiom meaning a futile or deceptive tactic). This is because there is no change in the total supply volume or timing, only the subscription period is being moved forward.

According to the Ministry of Land, Infrastructure and Transport on the 29th, the government decided the day before to increase this year’s pre-subscription volume by 2,000 units from the initially announced 30,000 units to 32,000 units. This includes adding a total of 2,000 units from next year’s planned pre-subscription: 300 units in Incheon Gyeyang, 700 units in Seongnam Geumto, and 900 units in Paju Unjeong 3. Accordingly, a total of about 32,000 units will be supplied through pre-subscription in July (4,333 units), October (10,000 units), November (4,100 units), and December (13,600 units) this year. However, this measure is essentially bringing forward some of next year’s pre-subscription volume to this year. The total pre-subscription volume from this year to next remains unchanged at the previously announced 62,000 units.

The plan to expand the pre-subscription target, currently only applied to public sale housing, to include private sales on public land and public sales in urban areas is also seen by the industry as having little effect in calming market buying demand. The government’s intention is to introduce the pre-subscription system, currently operated only for houses sold by Korea Land & Housing Corporation (LH) on public land, to apartments sold by private construction companies that win bids on public land. Pre-subscription will also be possible in new housing complexes under Seoul’s urban public housing complex projects, public reconstruction, and public redevelopment. Minister of Land, Infrastructure and Transport Noh Hyung-wook said, "Pre-subscription has the effect of supplying scheduled housing 2 to 3 years earlier," and added, "We expect it to have a definite effect on stabilizing the current market."

However, the market drew a line, saying, "This is different from expanding supply." Although pre-subscription is increased this year, it is only bringing forward the previously planned volume, so actual housing supply does not increase.

Professor Shim Gyo-eon of Konkuk University’s Department of Real Estate said, "Since there is no actual change in supply volume, its effectiveness is very low," and evaluated, "In short, it seems to be a policy created psychologically to stabilize the market because something had to be done."

There are also concerns that it could be ‘false hope’ for actual homebuyers without housing, as it takes considerable time before the houses are actually built. Even if one wins the pre-subscription brought forward, they must continue to maintain their status as a non-homeowner, which increases demand for jeonse (long-term lease). If jeonse prices rise, housing purchase demand may increase again.

Seo Jin-hyung, president of the Korea Real Estate Society (professor at Gyeongin Women’s University), pointed out, "This is essentially a ‘Josam-mosa’ policy that keeps the supply volume the same but only expands the eligible applicants," adding, "Since it only intensifies the false hope for applicants who think they might win the ‘lottery subscription,’ measures to increase the total supply volume must be introduced."