[Ryu Taemin's Real Estate A to Z] Apartment 'Jupjup' Seondang Hugom? ... Now Seongom Hudang!

Godeok Lotte Castle Bene Luce 84㎡ Non-Sequential Subscription Competition Rate 80,000 to 1
Demand Surges Amid Expectations of 1 Billion KRW Capital Gains
Funding Difficult Due to LTV and DSR Loan Regulations
Must Prepare 800 Million KRW Cash Without Loans... 10-Year Re-Subscription Restriction Upon Cancellation

Apartment complex in Seoul area (Photo by Yonhap News)

[Asia Economy Reporter Ryu Tae-min] Following the presidential election, expectations of rising housing prices have intensified, heating up the Seoul apartment non-priority subscription market, known as ‘Jupjup.’ Word has spread that these lottery apartments can yield several hundred million won in capital gains upon winning, attracting significant interest from buyers. However, experts warn that due to tightened government loan regulations making financing difficult and restrictions on re-winning if contracts are canceled, caution is necessary.

According to the Korea Real Estate Agency’s subscription website on the 18th, 168,644 people applied for the non-priority subscription for two 84㎡ (exclusive area) units in ‘Godeok Lotte Castle Bene Luce’ in Sangil-dong, Gangdong-gu, Seoul, which became available due to contract cancellations. The competition rate reached 84,322 to 1. Non-priority subscription refers to accepting new applications for remaining units that arise after the resident recruitment phase due to reasons such as non-contract or disqualification. Applicants must be at least 19 years old and reside in the relevant area.

This complex, which was offered in May 2017 and completed move-in in December 2019, had two contracts canceled due to supply order disturbances. These units were originally supplied at prices of 723.5 million won and 794 million won five years ago, while the current market price for the same area is around 1.6 to 1.8 billion won. Winning the subscription could yield an expected capital gain of 900 million to 1 billion won, and since winners are decided by lottery, demand surged massively.

The problem is that even if one wins, financing is difficult. According to KB Kookmin Bank, as of the 11th, the market price for an 84㎡ unit in this complex is 1.5925 billion won. If the market price exceeds 1.5 billion won, under the December 16, 2019 measures banning mortgage loans, even those without a home cannot obtain a mortgage loan. Therefore, winners must prepare over 800 million won in cash without any mortgage loan by the final payment deadline of May 31.

Even in complexes where the market price does not exceed 1.5 billion won, the situation is similar. From this year, strengthened Debt Service Ratio (DSR) loan regulations apply not only to interim payments but also to final payments, making financing practically difficult.

If a contract is canceled due to failure to pay funds on time after winning, re-winning in housing subscriptions is restricted for 7 to 10 years. In May last year, the Ministry of Land, Infrastructure and Transport revised regulations so that those who receive non-priority units in regulated areas cannot win general subscriptions for a certain period, the same as general subscriptions. Currently, the re-winning restriction period is 10 years in speculative overheating districts and 7 years in adjustment target areas.

Seo Jin-hyung, president of the Korea Real Estate Society (professor at Gyeongin Women’s University), said, “While maintaining the loan management policy, LTV and DSR regulations should be eased for actual demanders such as non-homeowners to smoothly secure opportunities to own a home.” He added, “If you win but cannot prepare funds, you may suffer from re-winning restrictions, so rather than applying blindly, it is necessary to carefully consider your financing plan in advance.”