[Practical Finance] 1.03 Million Cancel Subscriptions as 'Lotto Subscription' Disappears... Should You Keep Your Subscription Account?

Recently, the so-called 'lottery subscription' has disappeared, leading to a continuous decline in the number of subscription account holders. As housing prices continue to rise, there is also talk of the 'uselessness of subscription accounts.' In this situation, which is more advantageous: canceling or maintaining the subscription account? Experts advise that it is still necessary to be cautious about canceling the subscription account.

[Image source=Yonhap News]

According to Korea Real Estate Board's Subscription Home as of the end of April, the number of nationwide housing subscription savings account holders was 26,003,702. After peaking in June last year (27,031,911), the number began to decline from July (27,019,253). The number of housing subscription savings account holders has decreased for 10 consecutive months, with a total reduction of 1,028,209 during this period.

This is believed to be because the so-called 'lottery subscription' has become difficult as the gap between the high sale prices and existing housing prices has narrowed. In fact, recently, the rise in construction costs such as material and labor costs combined with the impact of high interest rates has kept private apartment sale prices nationwide soaring. According to the Housing and Urban Guarantee Corporation (HUG), as of the end of April, the sale price of private apartments was 15,985,200 KRW per 3.3㎡, up 0.8% from the previous month (15,856,500 KRW). Compared to the same period last year (14,582,700 KRW), it increased by 9.6%.

Moreover, the government lifted real estate regulations on all areas except the three Gangnam districts (Gangnam, Seocho, Songpa) and Yongsan-gu at the beginning of the year, so private land is no longer subject to the sale price ceiling system, making it unlikely that sale prices will fall in the near future. On the other hand, as the real estate market enters a slump and existing housing prices decline, it has become harder to gain capital gains from subscription wins as before.

Nevertheless, experts recommend maintaining the subscription account. Although new construction sale prices seem relatively high due to the recent decline in real estate prices, it is advantageous to maintain the first-priority subscription conditions to secure new units at affordable prices when the real estate market rebounds. Furthermore, if the existing account is canceled, related subscription points will disappear, so caution is needed when canceling the subscription account. In the point system, the score difference varies depending on the subscription period: 1 point for less than 6 months and 17 points for over 15 years. Park Jimin, CEO of Wolyong Subscription Research Institute, said, "A subscription account is essential to purchase an apartment through subscription. Canceling the account results in losing conditions such as subscription period and deposit required for first-priority eligibility, so it is better to maintain the account to keep options open rather than hastily canceling it."

Currently, to qualify for first priority, one must have been subscribed to the account for at least 1 year (6 months in non-metropolitan areas) in non-regulated areas, and for at least 2 years in speculative overheated districts. For general supply of national housing, first-priority qualification is met by making 12 payments (metropolitan area) or 24 payments (speculative overheated districts). However, for private housing, unlike national housing, the payment amount per installment does not need to be met to qualify for first priority. Instead, the deposit amount by region must be satisfied. Currently, in Seoul and Busan, the deposit standards are 3 million KRW for units up to 85㎡, 6 million KRW for units up to 102㎡, and 15 million KRW for units over 135㎡.

The increased utility of subscription accounts due to the government's successive lifting of real estate regulations is another reason to maintain the subscription account. In fact, after the major relaxation of subscription regulations through the 1·3 real estate measures, the decline in subscription accounts has gradually slowed. In January, the decrease was about 140,000 in one month, but it narrowed to 100,000 in February, 80,000 in March, and 50,000 in April. Park said, "With the 1·3 measures, the subscription period for first priority was shortened from 2 years to 1 year except for the Gangnam 3 districts and Yongsan-gu, and the 2-year residency requirement in those areas was removed. Also, even non-heads of households can apply, and there are no restrictions on re-winning. Since the subscription threshold has been significantly lowered, it is necessary to maintain the subscription account to expand opportunities."