[Practical Finance] Instead of the 'Sky's the Limit' Subscription, How About Trying 'Jupjup'?

If Contract Is Forfeited or Winner Disqualified, Non-Sequential Subscription 'Jupjup' Available
Reserved Lot Bidding with Missing Member Quotas Gains Niche Market Attention
Open to Anyone Regardless of Subscription Account
No Residency Requirement, Demand from Gap Investment Too

Apartment buildings in the Seoul area (Photo by Yonhap News)

[Asia Economy Reporter Ryu Tae-min] Although the pre-sale of the 3rd phase new towns and other metropolitan areas has begun in earnest, apartment prices remain high, leaving the real demand group dreaming of ‘owning a home’ with persistent anxiety. Especially in major areas of Seoul and Gyeonggi Province, the newly supplied units are scarce, and with the increase in winning points, the threshold is getting higher. Accordingly, recently, more buyers are turning their attention to ‘Jupjup’ (no subscription savings account required) or non-ranking subscription methods.

◆Aiming for capital gains through ‘Jupjup’ instead of general subscription= The so-called ‘Jupjup,’ or non-ranking subscription, is considered a niche market. Non-ranking subscription refers to selecting winners through a random draw when there are cancellations of sales contracts or disqualified subscription winners. Anyone aged 19 or older who is a household member without a home can apply regardless of whether they have a subscription savings account. Especially, since the project owner cannot arbitrarily raise the sale price and must obtain approval from the local government head, most units are supplied at the original sale price, which is much cheaper than the current market price.

Recently, financially capable buyers are actively participating in non-ranking subscriptions, focusing on prime complexes expected to yield capital gains. On the 17th, a total of about 170,000 people applied for two units at Godeok Lotte Castle Bene Luce 2 in Sangil-dong, Gangdong-gu, Seoul, supplied at prices from five years ago, where winning the subscription could yield capital gains exceeding 900 million KRW, setting a new record of 84,322 to 1. This complex was completed in December 2019 and residents have moved in, but non-ranking subscriptions were held for two units whose contracts were canceled due to disruption of supply order, among others.

Last month, the ‘Doraem Village 13 Complex Joongheung S-Class Green County’ in Dodam-dong, Sejong City, which offered 70 units through non-ranking subscription, attracted a total of 90,000 applicants. The units were supplied at prices from eight years ago, and since winning the subscription could yield capital gains of over 300 million KRW, a large crowd gathered. This complex was built as public rental housing in 2014, and after fulfilling the rental obligation period, priority was given to existing tenants for sale, with the remaining 70 units resold this time.

◆Purchasing new buildings without a subscription savings account through reserved lot bidding= Bidding on reserved lots is another method. Reserved lots refer to units left unsold in a project due to errors such as omission of member units in a redevelopment project. This is a mandatory requirement for the association, and up to 1% of the total number of units can be reserved as reserved lots. Associations usually set aside about 10 to 20 units as reserved lots before general sales.

Reserved lots are sold to the public through a bidding process at the discretion of the association a few months before completion. The highest bidder above the minimum bid price set by the association wins the bid. Since the sale occurs close to move-in time, the price is based on market value rather than the sale price. Anyone aged 19 or older can participate in reserved lot bidding without a subscription savings account.

The biggest feature of reserved lot bidding is that the building and unit number can be known in advance. Unlike member or general sales, there is no lottery; bidders can specify their preferred unit type, building, and number. Especially, since reserved lots are taken from member units, they often include apartments with good floors and orientations. Additionally, services exclusive to member units, such as free balcony expansion or premium finishing materials, are also available, and there is relatively more freedom regarding resale restrictions, which is considered an advantage.

◆Gap investment ‘OK’ even in land transaction permission zones= Recently, interest in reserved lot bidding has increased mainly in the Gangnam area. Most of the Gangnam area designated as land transaction permission zones prohibit leasing due to a two-year mandatory residence requirement. However, this does not apply to reserved lots, allowing tenants to lease, which attracts demand aiming for gap investment.

In fact, on the 4th, ‘The H Banpo La Classe’ in Banpo-dong, Seocho-gu, completed the sale of reserved lots. Four units, including one 59㎡ and three 84㎡ units, were sold through first-come, first-served contracts at 2.7 billion KRW and 3.3 billion KRW respectively. This complex had failed to sell three times last year but recently saw a turnaround. Additionally, ‘Raemian La Classe’ in Samseong-dong, Gangnam-gu, announced a sale bid for six reserved lots and succeeded in selling five units.

The representative channel to check information on reserved lot sales in Seoul is the redevelopment/reconstruction ‘Cleanup System’ website, as associations are required to post bidding announcements there. It is also helpful to regularly check the websites of interested complexes or directly inquire at the association office. Sometimes, checking sale announcements in newspapers is another method.