[Ryu Taemin's Real Estate A to Z] Surging Unsold Units... How Are They Different from Uncontracted Units?

Unsold Units Result from Insufficient Applicants
Uncontracted Units Occur Despite Competition Over 1:1 Due to Ineligibility or Contract Withdrawal
However, Inclusion of Housing Units Varies by Application
Purchasing Uncontracted Units May Cause Loss of Application Opportunity

A sales notice is posted at an apartment complex in Seoul. (Photo by Yonhap News)

[Asia Economy Reporter Ryu Taemin] As the fever of the subscription market in the Seoul metropolitan area, including Seoul, where ‘random subscription’ continued, has recently cooled rapidly, unsold complexes are emerging everywhere. Despite lowering the initial sale price or conducting more than 10 rounds of non-priority subscriptions (jupjup), undersubscription incidents are repeatedly occurring. There have even been cases where entire complexes failed to secure contracts. Although these cases are collectively called ‘unsold units,’ unsold and uncontracted units have distinctly different impacts on future subscriptions, so caution is required.

Unsold units are divided into ‘post-completion unsold’ and ‘uncontracted units’ depending on the cause. Post-completion unsold units occur when subscriptions proceed up to the second priority of general supply, but the number of applicants is insufficient compared to the number of supplied houses. These are mostly ‘malignant unsold units’ caused by a lack of demand due to low competitiveness in price, location, or low expectations of price increases. In such complexes, the subscription competition rate per housing type does not exceed 1 to 1.

On the other hand, uncontracted units are leftover units that occur because the number of applicants exceeded the number of supplied houses in the main subscription, with a competition rate exceeding 1 to 1, but due to reasons such as subscription disqualification or contract cancellation. Typical reasons for disqualification include errors in entering point items, re-winning restrictions, and failure to meet qualifications. Contract cancellation units refer to cases where the winner changes their mind after winning and does not proceed with the contract or where the contract is automatically canceled due to continuous delay in paying the deposit.

The problem is that whether these units are included in the number of houses when subscribing differs depending on the type. According to Article 53-10, Clause 10 of the Housing Supply Regulations (Criteria for Determining Housing Ownership), a pre-sale right contracted first through a first-come, first-served contract is not included in the number of houses. In other words, post-completion unsold units are not counted as housing numbers if they are in the pre-sale right state before moving in.

However, uncontracted units are counted as housing numbers, so caution is necessary. Especially if you are waiting for or eyeing a subscription, purchasing uncontracted units may cause you to lose subscription opportunities, so you must check carefully. You can check the subscription competition rates for each housing type on the Korea Real Estate Board’s Subscription Home website.

Non-priority subscriptions due to unsold or uncontracted units can also be subject to re-winning restrictions, so prudence is required. If you win a non-priority subscription in a regulated area and then cancel the contract, you will face a 10-year re-winning restriction in speculative overheated districts and a 7-year restriction in adjustment target areas. In fact, a sales official said, “Many in their 20s and 30s who just put in subscriptions end up canceling contracts because they cannot afford the costs after winning,” adding, “There are increasing complexes that prominently display explanations about re-winning restrictions in their non-priority subscription resident recruitment announcements.” Meanwhile, non-priority subscriptions conducted in non-regulated areas not included in speculative overheated districts or adjustment target areas have no separate re-winning restrictions even if the contract is canceled after winning.