[Practical Finance] 'Home Ownership' Easier for Newborn Families

First, Increase Supply Volume
Public-Private Sale Housing Supply Volume
Expanded from 70,000 to 120,000 Units

One More Special Supply Opportunity
Re-winning Allowed Even with Past Winning History

Lower Loan Barriers
Relaxed Income Requirements for Newborn Special Loans

It will become easier for families planning to have children to secure their own homes. The supply volume for households with newborns will increase, and winning housing subscription lotteries will become more advantageous. The eligibility for low-interest loans will also expand. The recent "Measures to Reverse the Low Birthrate Trend," jointly announced by the Low Fertility and Aging Society Committee and related ministries, includes various homeownership support policies that families with children must consider.

"Priority Housing Supply for Newborn Households"

The annual priority supply of public and private sale housing for households with newborns will increase from 70,000 to 120,000 units. The priority supply ratio for newborns within the special supply quota ('teukgong') for newlyweds in private apartment sales will also expand from the current 20% to 35%. This means increasing the chances of winning special supply for households with children among newlyweds.

The proportion of special supply units for newlyweds within private sales will also rise from the current 18% to 23%. This will effectively add about 10,000 units annually, increasing from approximately 36,000 to 46,000 units.

In public sales, 50% of the general supply units will be prioritized for newborn households. Among public rental housing, 5% of the total general supply units of construction rental housing will be allocated as priority supply for newborns. For purchased and jeonse (long-term lease) rentals that are re-supplied after existing tenants move out, the portion allocated first to newborn households will increase from 10% to 30%. In the public-supported private rental sector, a newborn special supply (5% of total units) and a newborn priority supply within the general supply (30%) will be newly established.

Additionally, the government will lift the Greenbelt in the metropolitan area within this year to announce new housing sites capable of building 20,000 units. Up to 14,000 units, or 70% of the total, will be supplied as public housing for newlyweds, childbirth, and multi-child families.

The target supply volume for purchased rental housing will increase by 30,000 units from the existing 70,000 units between this year and next year. Of the additional supply, 22,000 units will be allocated to newlywed and childbirth households.

"One More Special Supply Subscription Opportunity After Childbirth"

In particular, even if a household has already won a special supply, they will be allowed to apply for special supply one more time after having a child. Currently, the special supply opportunity is granted only once in a lifetime. However, households that have children after the government's low birthrate measures announced on the 19th will have their past special supply winning records erased and be given one more chance.

A Ministry of Land, Infrastructure and Transport official explained, "Since having a child requires a larger home, this is to provide an opportunity to move." However, there is a condition that the existing home must be disposed of before moving in. The special supply types eligible for additional applications include newborns, newlyweds, multi-child families, and elderly parents.

For public sales general supply, new dual-income household income criteria have been established. Although there is currently a standard of "urban worker average monthly income 100% or less," it was considered a "marriage penalty" because married couples often exceed this threshold.

Going forward, for sequential selection based on the total amount or number of subscription savings payments, the income criteria will be set at 100% of the urban worker average income for single-income households and 140% or less for dual-income households. For the lottery system, the criteria will be 100% for single-income and 200% for dual-income households.

"Newborn Special Loan Also Available to High-Income Couples"

The combined income requirement for couples eligible for the newborn special loan will also be relaxed. From January 1 next year, for households that give birth within three years, the limit will increase to 250 million KRW annually. This allows high-income dual-income couples to also receive the newborn special loan.

The newborn special loan is a system that provides low-interest loans at 1-3% per annum, up to 500 million KRW, for home purchase funds and jeonse deposits to non-homeowners or one-home households (for refinancing) who have given birth or adopted within two years from the loan application date. Eligible homes for purchase loans are priced at 900 million KRW or less and have a net floor area of 85㎡ or less.

However, the income range of 200 million to 250 million KRW corresponds to about the top 2%. Therefore, there has been controversy over whether it is appropriate to consider this group as eligible for low-interest loans. Lee Ki-bong, Director of Housing Welfare Policy at the Ministry of Land, Infrastructure and Transport, said, "We want to use all available means to reverse the low birthrate trend," adding, "We will implement this experimentally for three years and then decide whether to extend it."

Households that have additional children during the newborn special loan period will receive further preferential interest rates. The original 0.2 percentage point reduction will be increased to 0.4 percentage points.

Ham Young-jin, Head of Real Estate Research Lab at Woori Bank, evaluated the measures by saying, "Households with newborns who do not yet have the capacity to purchase a home will have more opportunities to be allocated priority supply units in public rental and public-supported private rental housing," and "For households planning to purchase through sales, easing income and winning history restrictions will give them a significant advantage in winning housing subscriptions."

He added, "By relaxing the income requirements for the newborn special loan, most households with newborns are expected to benefit from low-interest loans when purchasing homes," and "Compared to regions with many unsold units and declining housing prices, the housing market recovery expectations are higher in the metropolitan area, so residents there will have a stronger will to secure their own homes."