[Practical Finance] "Consider Benefits Like Spouse Income Deduction for Subscription Savings"

Subscription Savings Maximum Interest Rate Raised to 3.1%
Spouse Income Deduction and Overlapping Subscriptions Between Couples, etc.

Despite the argument that subscription savings accounts (Cheongyak Savings Accounts) are becoming useless, it is expected that there will not be many non-homeowning low-income households actually closing their accounts. Although new subscriptions are decreasing and cancellations are increasing, still about half of the domestic population maintains these accounts to apply for housing. Experts analyze that subscription savings accounts are necessary to receive benefits from government real estate policies.

In particular, those who have maintained their subscription savings accounts for a long time with public housing in mind are expected to find it more difficult to cancel than those targeting private housing. The winning threshold for public housing subscription is around 12 to 15 million KRW, and holders must have maintained the account for at least 10 years. Kim Gyu-jung, head of the Asset Management Succession Research Institute at Korea Investment & Securities, said, "The incentive for new subscriptions may be small, but existing subscribers may have deep concerns. Especially for those preparing for public housing, it is naturally precious." He also predicted that although housing supply may not be as abundant as in previous years, the government is making efforts such as lifting restrictions on Greenbelt (GB) areas to continue supply, so subscription savings accounts will not decline as sharply as feared.

The government continues to improve the system to prevent subscription savings accounts from being neglected. When applying for public sale housing, the recognized monthly payment amount will be increased, and the interest rate will be raised by 0.3 percentage points to 3.1% annually. Additionally, the income deduction and tax exemption conditions for subscription savings will be expanded not only to non-homeowning household heads but also to their spouses. Currently, if the annual income of a subscription savings account holder is below 70 million KRW, they can receive an income deduction of up to 40% of the savings amount (up to 3 million KRW annually). In this regard, Moon Jin-seok, a member of the Democratic Party of Korea, recently proposed a partial amendment to the Special Tax Treatment Control Act. This allows couples to join subscription savings accounts together, gaining additional opportunities to own a home and receive tax benefits.

Along with this, since March this year, the government has allowed couples to apply for subscriptions simultaneously, and if both are selected, the first application will be valid. Furthermore, when calculating points for private housing, the spouse’s subscription savings account period can be combined up to 50% (maximum 3 points), and in case of a tie, the person with the longer account period will be prioritized for selection.

However, experts analyze that the subscription savings account system is gradually deviating from its original purpose of supporting non-homeowning low-income households in acquiring their own homes. Kim said, "The price gap between public and private housing is widening, and the prices of private housing are soaring. Depending on how you define low-income households, there may be differences, but it is true that it is not like before."

There is also a view that the subscription system must change in line with social trends such as low birth rates and aging, and that applicants will have to strive to meet new criteria. For example, with the emergence of special loans and special supply for newborns and customized subscription systems for newlyweds, those not included in these categories may be excluded. Ham Young-jin, head of the Real Estate Research Lab at Woori Bank, said, "There may be groups that have an advantage in using subscription savings accounts," adding, "This is a natural phenomenon due to changes in social structure."