[Practical Finance] Popularity of Subscription Market Fades... Number of Subscribers Dramatically Decreases

Seoul and 5 Major Metropolitan Cities See Two Consecutive Months of Decline, Gyeonggi and Incheon Experience First Drop of the Year
Falling Housing Prices Reduce Appeal of Subscription and Contribute to Weakened Buying Sentiment

[Asia Economy Reporter Hwang Seoyul] The nationwide subscription graph for housing subscription savings accounts, which had been on an upward trend this year, has taken a downturn. This is due to the decline in real estate purchasing sentiment and the reduced advantage of pre-sale prices caused by falling transaction prices, leading to a waning popularity in the subscription market. Seoul and the five major metropolitan cities saw a decrease in subscribers for two consecutive months following last month, while Gyeonggi and Incheon experienced a decline in subscribers for the first time this year compared to the previous month.

According to the Korea Real Estate Board's Subscription Home as of the end of last month, the total number of nationwide housing subscription savings account holders was 27,019,253, a decrease of 12,658 from June (27,031,911). Currently, among the four main types of subscription savings accounts (Housing Subscription Comprehensive Savings, Subscription Savings, Subscription Deposit/Installment Savings), only the Housing Subscription Comprehensive Savings allows new subscriptions.

The change in the number of nationwide subscription savings account holders is due to the decrease in subscribers in Seoul and the five major metropolitan cities for two consecutive months, along with a decline in Gyeonggi and Incheon. In June, the number of subscribers in Seoul and the five major metropolitan cities decreased by 4,118 and 1,422 respectively compared to the previous month. Although nationwide subscribers had increased by 6,589 compared to the previous month earlier this month, last month saw a larger decrease with Seoul down by 7,271 and the five major metropolitan cities down by 4,733. Additionally, Gyeonggi and Incheon saw a decrease of 3,637 subscribers compared to the previous month, breaking the nationwide subscriber growth trend.

[Image source=Yonhap News]

Experts analyze that this phenomenon reflects the sentiment of buyers anticipating a decline in housing prices. When the housing market stagnates and transaction prices fall, the relative advantage of subscribing to pre-sale housing at a lower price diminishes. For example, in Gyeonggi Province, the city with the second-largest decrease in Housing Subscription Comprehensive Savings account holders compared to the previous month was Anyang (-540). The pre-sale price of ‘Anyang Station Prugio The Sharp’ (exclusive area 84㎡), which was sold in March, ranged from a minimum of 939.7 million KRW to a maximum of 951.9 million KRW. This is similar to the actual transaction prices in April for the nearby ‘Raemian Anyang Megatria’ (84.82㎡), which ranged from a minimum of 940 million KRW to a maximum of 980 million KRW. The same unit size in that complex was transacted at 1.09 billion KRW as recently as August last year.

The contraction of real estate purchasing sentiment itself also appears to be a cause for the decline in subscription savings account holders. According to Real Estate R114, 51,905 housing units are scheduled to be sold in Gyeonggi from next month through December, but the number of Housing Subscription Comprehensive Savings account holders actually decreased by 2,569 compared to the previous month. Park Jimin, head of the Monthly Subscription Research Institute, said, "Gwangmyeong City has the advantage of being under the price ceiling system, and Goyang City still has units planned for sale, yet the number of subscribers decreased," adding, "Overall, the decline in real estate market sentiment has caused fluctuations in subscription savings account numbers."

Meanwhile, as subscription demand decreased, the competition rate for general supply also dropped. According to Real Estate R114 data, the nationwide competition rate for first and second priority subscriptions last month was 7.26 to 1, down from 13.21 to 1 the previous month. Although the number of general supply units increased by 1,377 to 8,780 units compared to the previous month, the total number of applicants was 63,764, a decrease of more than 30,000 from June. By region, areas with a decrease in subscription savings account holders such as △Gyeonggi (14.35 to 1 → 5.76 to 1) △Incheon (5.23 to 1 → 3.63 to 1) △Busan (61.16 to 1 → 42.04 to 1) also saw a decline in subscription competition rates.