Half of Apartment Units Allocated to Special Supply, but Actual Distribution Falls Below 30%

20.5% of Units Shifted to General Supply Due to Lack of Applicants
Most Special Supply Units in Seoul and Sejong Actually Provided

Apartment buildings in the Sejong City area. Photo by Yonhap News

Although nearly half of apartment units are initially allocated through special supply programs for newlywed couples and families with multiple children, the actual proportion supplied to eligible applicants is less than 30% of the total.

According to a report titled "Operation Status and Issues of the Special Supply Subscription System" released on the 26th by the Korea Research Institute for Construction Policy (KRICP), 49.0% of all apartment units are initially allocated via special supply. However, only 28.5% of the total units are actually supplied to eligible applicants through this program. KRICP analyzed subscription data from 1,853 complexes, totaling approximately 900,000 units, from January 2020 to June of last year.

The reason why only 28.5% of the total units are supplied to actual demand through special supply is that a significant number of units are converted to general supply due to a lack of applicants. Units initially allocated to special supply but transferred to general supply because of insufficient applicants accounted for 20.5%.

The proportion of units converted from special supply to general supply due to under-subscription or cancellations varied by region. The rates were 27.2% in other provinces, 21.6% in regional metropolitan cities, and 14.1% in the Seoul metropolitan area. In Seoul, Sejong, and Jeju, most of the units allocated through special supply were actually supplied, but in other regions, more than 10% were converted to general supply. In North Gyeongsang (32.9%), Ulsan (32.6%), and South Chungcheong (30.8%), the proportion of units converted from special supply to general supply exceeded 30%.

Since 2022, when the housing market deteriorated, the actual supply rate through special supply has decreased, and the conversion rate to general supply has surpassed 20%.

Additionally, the lower the supply price, the more units are allocated through special supply, but the higher the proportion that is converted to general supply due to a lack of demand. The conversion rate from special supply to general supply was highest for units priced at 100 million won or less, at 35.7%, and lowest for units priced over 900 million won, at 12.7%.

KRICP explained, "So far, the allocation of special supply units has not been based on actual demand, but rather on policy considerations and priorities," adding, "There is a mismatch between the supply and demand for special supply by target group and allocation volume, so it is necessary to reassess and adjust the program based on a prior understanding of market demand for each target group."

The report continued, "In the subscription market, where asset value is anticipated, demand concentration is also evident within special supply programs, so there needs to be consideration of the conflicting relationship between regional policies and asset allocation policies." It further stated, "Since the subscription system is linked with various programs such as subscription savings accounts, national housing bonds, and the Housing and Urban Fund, a long-term roadmap is needed to improve the housing sales system."