'Seondanghugom' Also Broken... Seoul Subscription Undersubscribed and Even Abandoned

Urgent Review of the Real Estate Market in the Second Half
Poor First-Choice Subscription Performance of 'I-Moon I-Park Xi' Due to High Sale Prices

Mr. Lee, a man in his 40s working in Seoul, recently won the subscription for an 84㎡ unit at ‘Sangdo Prugio Clavenue’ being built in Dongjak-gu, Seoul, but is currently hesitating to sign the contract as he cannot secure over 1.3 billion KRW in funds. He said, "Although I won the subscription, interest rates have risen sharply and loans are not easy to get, so I am hesitant about signing the contract," adding, "Even if I sign, I would have to sell my current home, but the remaining balance would still be insufficient, so I would not be able to move in and would have to rent it out as a jeonse (long-term deposit lease)."

The feverish subscription market in Seoul, once described by the phrase ‘Seondang Hugom’ (winning first, worrying later), is cooling down. Some sites, which were considered major projects in the second half of the year and had prices that rose by 200 to 300 million KRW within a few months, are now showing poor subscription results, and there are even complexes where many winners fail to sign contracts. This is believed to be due to increased price sensitivity among buyers amid concerns that rising interest rates and tightened loan policies will put downward pressure on the housing market.

According to the Korea Real Estate Board’s Subscription Home on the 3rd, the ‘Imun I-Park Xi’ in Imun-dong, Dongdaemun-gu, Seoul, recorded an average competition rate of 16.87 to 1 with 13,280 applicants for 787 units in the first priority subscription held last month. Compared to the competition rates of ‘Raemian La Grande’ (79.1 to 1) and ‘Hwigyeong Xi Decencia’ (51.7 to 1) in Dongdaemun-gu in August, this is a relatively low result. Some unit types such as 20㎡, 59㎡E, 84㎡D, and 84㎡ failed to fill the number of units in the first priority and moved on to the second priority subscription.

Until the first half of this year, new housing sales in Seoul continued to sell out, reviving the ‘subscription undefeated theory.’ ‘Cheongnyangni Lotte Castle High Luce’ recorded an average competition rate of 242.3 to 1 in the first priority subscription with over 20,000 applicants, and ‘Yeongdeungpo Xi Dignity’ also recorded a high competition rate of 198.76 to 1. Major complexes such as ‘Cheonggye SK View’ and ‘Yongsan Hoban Summit Edition’ also recorded triple-digit competition rates.

However, recent signs indicate that this trend is breaking down. ‘Sangdo Prugio Clavenue’ in Sangdo-dong, Dongjak-gu, initially recorded a competition rate of 14 to 1 at the first sale and was considered successful, but many winners have given up signing contracts, leading to first-come, first-served sales. Gaebong Hoban Summit attracted 2,776 applicants for 110 units in the first and second priority subscriptions last month, but due to low contract rates, a no-priority subscription was held.

The main reason for the cooling subscription market is cited as high sale prices. Ye Kyung-hee, senior researcher at Real Estate R114 Research Team, said, "The rise in market interest rates and the atmosphere of loan tightening have expanded downward pressure on the housing market, leading to weakened buying sentiment," adding, "Also, due to recent increases in loan interest rates, sensitivity to sale prices has increased again, so for the time being, there will be variations in selection even within the same area."

In fact, comparing the sale prices of ‘Imun I-Park Xi,’ ‘Raemian La Grande,’ and ‘Hwigyeong Xi Decencia,’ which were sold side by side in Dongdaemun-gu, prices rose by hundreds of millions of KRW within just two to three months. The highest sale price for an 84㎡ unit at Imun I-Park Xi was 1.30229 billion KRW, while the highest sale price for an 84㎡ unit at Hwigyeong Xi Decencia was 976 million KRW. Raemian La Grande’s highest price for an 84㎡ unit was about 1.099 billion KRW.

The attitude of buyers toward the previously rampant ‘blind subscription’ atmosphere in Seoul’s subscription market has also changed. Mr. Na, in his 40s, who initially planned to subscribe for a 59㎡ unit at Imun I-Park Xi, said, "After checking the first priority subscription competition rate, I am now hesitating whether to apply."

As buyers who desperately need to secure their own homes mainly participate in subscriptions despite high prices, there is an expectation that the subscription market will be reorganized into a market for actual users. Researcher Ye Kyung-hee predicted, "If investors who subscribed for resale purposes hesitate to enter the sale market, these speculative demands will exit the subscription market, and the market will rather be reorganized around actual users."