[THE Tilted Real Estate]② Aftermath of Deregulation... Accelerated Seoul Concentration Phenomenon

Seoul Housing Subscription Market Active... Increase in Pre-sale Rights Transactions
Policy Support Needed for Non-Capital Region Infrastructure Expansion

#. GS Construction's 'Yeongdeungpo Xi Dignity,' being built in Yangpyeong 12 District, Yeongdeungpo-gu, Seoul, was completely sold out during the preliminary winner contract on the 1st of this month. This complex, which issued the first resident recruitment announcement in Seoul after the government's 1·3 real estate measures, recorded an average competition rate of 198.8 to 1 in the first-priority subscription early last month. In contrast, the competition rate for 'Doosan We've the Zenith Ocean City' in Nam-gu, Busan, which held its first-priority subscription at the end of last month, was only 0.5 to 1. Other areas such as 'Pyeongtaek Hwayang Seohee Starhills Central Park' in Pyeongtaek, Gyeonggi (0.1 to 1) and 'Wanggil Station Kumho Eoullim Edugreen' in Seo-gu, Incheon (0.2 to 1) also failed to exceed a competition rate of 1 to 1.

Visitors at the Hwikyung Xi Decencia model house in Daechi-dong, Gangnam-gu, Seoul, are looking around the complex model.
[Photo by Kwak Minjae]

The government's regulatory easing for a soft landing of the real estate market is showing effects only in Seoul. Although the base interest rate, which had been taking giant steps (0.75 percentage point increases) last year, has stopped rising, demand is concentrated in Seoul, a higher-tier area, due to ongoing economic uncertainties. Experts predict that while polarization between Seoul and other regions is inevitable during the housing price rebound, the gap will widen further if infrastructure or self-sustaining capabilities are not secured in non-metropolitan areas.

On the 18th, Real Estate R114 analyzed subscription results from the Korea Real Estate Board's subscription homepage and found that in the first quarter of this year, six regions including Daegu, Gyeongbuk, Jeonnam, Jeonbuk, Chungnam, and Jeju each had one complex conducting subscriptions, all of which were undersubscribed. In Gyeonggi and Incheon, only 2 out of 8 and 1 out of 5 complexes, respectively, succeeded in closing subscriptions.

However, Seoul was different. Three complexes with 393 units offered for general sale in the first quarter attracted a total of 22,401 applicants, recording an average competition rate of 57 to 1. All achieved full subscription within the priority ranks. This trend continued into April, with 'Hwigyeong Xi Decencia' (Hwigyeong 3 District redevelopment) in Dongdaemun-gu recently recording an average competition rate of 51.7 to 1, with 17,013 applicants for 329 units in the first-priority subscription.

Following the removal of regulatory restrictions across all of Seoul except the Gangnam 3 districts (Gangnam, Seocho, Songpa-gu) and Yongsan-gu, the expansion of the small-to-medium-sized housing subscription lottery system to 60%, and the reduction of resale restriction periods to one year, immediate effects were seen. Additionally, the mid-term payment loan eligibility price limit, which had been relaxed from 900 million KRW to 1.2 billion KRW, was abolished from the 20th of last month, and the maximum mid-term loan limit per person of 500 million KRW was also removed. Furthermore, the lifting of residency and home ownership restrictions during the so-called 'Zupzup' (non-priority subscription) has led to increased participation from demanders and multi-homeowners turning their attention to Seoul.

The temperature difference between Seoul and other regions is also evident in the trading of pre-sale rights and move-in rights. In Seoul, transaction volumes have increased, and premiums have been added. According to the Seoul Real Estate Information Plaza, 55 pre-sale and move-in rights transactions have been recorded so far this year, 18 more than the 37 transactions from January to April last year. Considering that this month's data is still being compiled, the gap compared to last year is expected to widen further. Among these, the 'Cheongnyangni Station Lotte Castle SKY-L65' in Jeonnong-dong, Dongdaemun-gu, with an exclusive area of 84㎡, recently traded pre-sale rights at prices ranging from 1.09 billion to 1.1667 billion KRW, about 100 million KRW higher than the pre-sale price (930 million to 1.06 billion KRW).

On the other hand, non-metropolitan areas are struggling. Daegu, which has the highest number of unsold houses nationwide, is seeing pre-sale rights for 'The Sharp Suseong Oakley' in Suseong-gu, with an exclusive area of 84㎡, trading at a negative premium exceeding 100 million KRW. Due to the spread of unsold housing fears, supply in Daegu has also halted since the 'Hillstate Dongdaegu Central' in Dong-gu conducted subscriptions in January this year.

Kim Gyu-jung, head of the Asset Succession Research Institute at Korea Investment & Securities, said, "Although regulations in non-metropolitan areas have already been weaker than in Seoul, there is no noticeable improvement in the real estate market. In real estate markets where location has a significant impact, unless balanced development or infrastructure expansion in non-metropolitan areas is achieved through policy, the imbalance between the metropolitan area and other regions will worsen rather than benefiting from any trickle-down effect."