[Practical Finance] "To Break or Not"… Subscription Savings Strategy for Single-Homeowners

Reset Subscription Period Upon Cancellation
Keep Lottery Opportunities Alive to Aim for 'Housing Upgrade'

If You Don't Plan to Sell Your Home and Face High Loan Interest
Breaking the Subscription Could Be an Option... "Plan Your Assets Carefully First"

On the 28th, consultation related to subscription is being conducted at the 3rd New Town pre-subscription reception center set up in Jangji-dong, Songpa-gu, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Kim Hyemin] Last year, Mr. A, who succeeded in buying a home by 'Yeongkkeul' (borrowing to the limit), has recently been worried about whether to keep his subscription savings account, into which he has been depositing money for over 10 years. By depositing 100,000 won every month, more than 15 million won has accumulated in the subscription savings account. Now that he owns one house, there is no immediate need to use the account, but with pregnancy and rising loan interest rates, expenses have increased. Mr. A said, "There is no more merit, so I wonder if it is right to leave it as it is," and "I am considering whether to cancel the subscription savings account."

Recently, more one-home owners are expressing similar concerns on real estate communities. This is due to the increase in the 2030 generation who gave up on securing a home through subscription lotteries amid soaring competition rates over the past two years and instead bought built apartments through 'Yeongkkeul.' The subscription savings account, which has become practically useless after securing a home, raises the question: is it better to cancel it or keep it?

◆ If you sell your house, subscription eligibility is restored... Cancelling resets the subscription period = 'If you have money to eat out, keep the subscription savings account.' This has long been a maxim in the subscription market. Experts who advise maintaining the subscription savings account cite the 'subscription period' as the reason. Cancelling the subscription savings account effectively resets the 'subscription period.'

The largest portion of private sale subscription quotas is allocated by the point system. The higher the combined score based on criteria, the higher the chance of winning, and one of these criteria is the subscription period. If the subscription period exceeds 15 years, you can receive the full 17 points, which is a significant portion of the total 84 points. If a homeowner sells their house, the no-home period, which carries the highest points, resets to zero, but if the subscription savings account is maintained, it can at least offset this disadvantage.

Especially for public sales, maintaining a no-home period of just three years is required, and winners are selected based on the amount or number of payments into the subscription savings account, making it even more necessary. Yeokyunghee, Senior Researcher at Real Estate R114, said, "Time does not go back," and "Even if there is no immediate need to use the subscription savings account, it is necessary to be cautious about cancelling it."

◆ One-home owners can use it for 'housing replacement' = Having a home does not completely disqualify you from applying for subscriptions. While the point system quotas are for no-home applicants only, the lottery system allows one-home owners to apply.

In speculative overheated areas like Seoul, 50% of units over 85㎡ exclusive area are selected by lottery. In regulated areas, 70% are lottery quotas. Among these, 25% allow one-home owners to win, but winners must promise to dispose of their existing home within six months. In non-regulated areas, subscription applications are possible without disposing of the existing home. Particularly in non-regulated areas, there are considerable lottery quotas even for units under 85㎡ exclusive area.

If you live outside the metropolitan area, which is designated as a speculative overheated or regulated area, the possibility of switching to a new apartment through the subscription savings account increases even if you own a home. Senior Researcher Ye said, "In the metropolitan area, depending on price, location, and complex size, some places are failing to fill all units and experiencing unsold units," and "It is true that subscription winning opportunities have increased compared to the past."

◆ Strategies may vary depending on individual situations... Carefully plan your asset strategy = However, since the subscription market still favors no-home applicants, experts agree that decisions on whether to keep or cancel the subscription savings account should vary depending on each person's situation.

For example, whether the purchased home was intended for long-term holding or short-term profit affects the decision on cancelling the subscription savings account. If you bought a house through excessive 'Yeongkkeul' and are struggling to pay the soaring loan interest but do not plan to sell the house, cancelling the subscription savings account and using the lump sum to partially repay the loan principal might be a wiser choice. Conversely, if you have many dependents, maintaining the subscription savings account could be a smarter decision.

Even if you unexpectedly win a lottery quota, you need a plan to prepare the payment. In Seoul, for units over 85㎡ exclusive area, the sale price often exceeds 900 million won, and apartments priced over 900 million won cannot receive interim payment loans unless the construction company provides its own guarantee. This means you must prepare 60% of the sale price without a loan.

Ham Youngjin, Head of the Big Data Lab at Zigbang, said, "Once you become a homeowner, it is true that it is difficult to become the first priority for subscriptions in regulated areas," and "If you have financial leeway, there is no need to cancel, but since financial situations vary by individual, how you plan your assets is important."