Mapo The Classy 30-Day 27 Households Non-Order Subscription
Contract Rate Only 49% Due to Real Estate Market Slump
Sale Regulation Eased... Dunchon Jugong Likely to Have Pick-Up in March
[Asia Economy Reporter Onyu Lim] Despite the government's unprecedented relaxation of real estate regulations, the subscription market is struggling. Even large complexes in the heart of Seoul, which closed general subscriptions with double-digit competition rates, are now facing a flood of non-priority subscriptions due to successive contract cancellations. As the burden of interest rates continues to increase and there are no signs of a rebound in housing prices, the fear of unsold units is growing.
According to the Ministry of Land, Infrastructure and Transport's Subscription Home on the 26th, a non-priority subscription for 27 units at Mapo The Classy in Ahyeon-dong, Mapo-gu, Seoul, will be held on the 30th. This apartment complex is a large-scale development of 1,419 units redeveloped from Ahyeon 2 District and held a general subscription last December. At that time, 1,028 applications were submitted for 53 units, recording an average competition rate of 19.4 to 1. Despite the cold wave in the subscription market due to high interest rates, it was evaluated to have achieved good results thanks to its excellent location. Mapo The Classy is located between Ahyeon Station and Ewha Womans University Station on Subway Line 2, offering excellent proximity to major business districts such as Yeouido and Gwanghwamun.
However, when the results came out, contract cancellations poured in. Even after the winners and the backup winners were called in order, the contract rate was only 49%. Only 26 out of 53 units were contracted, and the remaining units were released for non-priority subscription.
The shock to the market is even greater as sales regulations were significantly eased to revitalize the subscription market. Previously, through the 1·3 measures, the government removed the residency obligation applied to apartments under the price ceiling system and reduced the resale restriction period from a maximum of 10 years to a maximum of 3 years in the metropolitan area. In non-regulated areas like Mapo-gu, the resale restriction period is only one year. Although Mapo The Classy held its general sale before the announcement of the measures, the regulations were applied retroactively, allowing it to benefit from the changed policy. However, as the burden of interest rates increases and housing prices continue to fall, contract cancellations appear to be increasing.
In particular, for Mapo The Classy, the tight schedule for final payment and the high sale price are cited as reasons for the low contract rate. The sale price of this apartment is 40.13 million KRW per 3.3㎡, the highest ever in the Gangbuk area. Being a post-sale complex, it was able to avoid the Housing and Urban Guarantee Corporation (HUG)'s high-price screening system, making such pricing possible.
Experts believe that in this year's sales market, complexes with competitive prices rather than location will survive. In fact, the recently fully sold Gangdong Heritage Xi in Gil-dong, Gangdong-gu, Seoul, was priced at 650 million to 775 million KRW for 59㎡ units, about 400 million KRW cheaper than Olympic Park Foreon, which was rebuilt from Dunchon Jugong nearby. Park Won-gap, Senior Real Estate Specialist at KB Kookmin Bank, said, "Given the uncertain future, people are more sensitive to price than location," adding, "Ultimately, price competitiveness will determine the success or failure of sales."
The government plans to significantly relax the eligibility requirements for non-priority subscriptions to resolve the rapidly increasing unsold units. The housing supply regulations will be revised next month to allow homeowners to participate in non-priority subscriptions and to abolish residency requirements. In Seoul, Olympic Park Foreon is likely to be subject to the eased regulations. The contract rate for this apartment is about 70%, with over 1,400 units reportedly abandoned by winners. Contracts with backup winners are scheduled to proceed next month. A sales industry official said, "After contracts with backup winners, units that still cannot find owners will likely be offered for non-priority subscription in March. If units remain even after that, construction companies' fear of unsold units will increase further."
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