Seoul Apartment Sale Prices Now 10 Million Won Higher Per 3.3㎡ Than Presale... Subscription "Safety Margin" Quadruples [Real Estate AtoZ]

Gap Widens 4.4 Times from 2.32 Million Won to 10.32 Million Won in One Year
Price Ceiling System Curbs Presale Price Increases... Some Complexes Sold at Half Market Value
Safety Margins Exist Even Outside the Three Gangnam Districts and Yongsan
Long-Term Installment Structure of Down Payment, Interim Payment, and Balance in Focus
"Popularity Will Rise Further If Presale Price Regulation and Sale Price Increases Continue"

This year, the gap between apartment sale prices and presale prices in Seoul has widened significantly. Just a year ago, the difference per 3.3 square meters was in the 2 million won range, but it has now expanded to over 10 million won. As the perception of a "market with guaranteed safety margins" grows, and the advantages of the subscription system-such as flexibility regarding mandatory residency and long-term installment payments-are being highlighted again, the popularity of Seoul’s subscription market is expected to rise even further.

Raemian Triniwon Sky Community. Samsung C&T Corporation Construction Division.

According to the Housing and Urban Guarantee Corporation (HUG) and KB Real Estate statistics on November 23, the average presale price of private apartments in Seoul in October was 46.95 million won per 3.3 square meters, while the average sale price was 57.27 million won for the same period. The gap between the two stands at 10.32 million won. When converted to the standard exclusive area of 84 square meters, this results in a price difference of about 260 million won.

In October 2024, just one year prior, the presale price in Seoul was 46.87 million won and the sale price was 49.19 million won, with a gap of only 2.32 million won. However, over the past year, the sale price surged by 16.4%, while the presale price rose by just 0.17%, causing the gap to widen more than fourfold.

The significant increase in this so-called "safety margin"-the difference between presale and sale prices-is mainly attributed to the presale price ceiling system. This system currently applies to private land in the three Gangnam districts (Gangnam, Seocho, Songpa) and Yongsan District, as well as to public land by default. In areas where the price ceiling is enforced, some complexes are sold at about half the market price, effectively curbing the rise in Seoul’s average presale prices.

For example, the exclusive 84-square-meter units at the recently launched "Raemian Triniwon" in Seocho District were priced at about 2.7 billion won. However, the market price for similar units in the vicinity ranges from 5 billion to 6 billion won. This means that a safety margin of up to 3 billion won can be secured through the subscription process.

Except for the three Gangnam districts and Yongsan, most areas in Seoul have a safety margin of around 100 million to 200 million won. Still, the fact that new apartments are supplied at lower prices than existing new builds is a decisive factor attracting subscription demand. Park Jimin, CEO of WolYong Subscription Research Institute, stated, "Seoul is a market where new builds are cheaper than existing ones," adding, "Even outside Gangnam and Yongsan, presale prices are lower than nearby new apartment prices, which is a very favorable condition for real buyers."

In contrast, regional markets are showing the opposite trend. As of October, the average presale price per 3.3 square meters in the five major metropolitan cities was 19.94 million won, while the sale price was 12.9 million won, making the presale price 7.04 million won (54.6%) higher. A year ago (October 2024), the presale price was 17.86 million won and the sale price was 12.92 million won, with a gap of 4.94 million won (38.2%). Over the past year, the presale price jumped by 11.7%, while the sale price actually fell, widening the gap even further.

Another appeal of the subscription market comes from the flexibility regarding "mandatory residency." Due to the October 15 real estate measures, all of Seoul has been designated as a land transaction permit zone, which imposes a two-year residency requirement when purchasing existing apartments. However, according to the Ministry of Land, Infrastructure and Transport, newly built presale apartments are exempt from these transaction permit requirements. In other words, successful applicants do not have to reside in the unit upon moving in and can rent it out to cover the balance payment. However, if a mortgage is taken out, a residency requirement is imposed, so only those who do not take out loans can lease the property.

In areas subject to the presale price ceiling, a separate "two to five-year residency requirement" is generally imposed. Even in these cases, if no interim or balance loans are taken, residency can be deferred for three years after moving in, allowing for rental operation. This is the so-called "three-year residency deferral" system, enabled by an amendment to the Housing Act passed in March last year, which allows a three-year deferral of the residency requirement for successful applicants in price-capped presale apartments.

Whether leasing or taking out a loan is more advantageous depends on the apartment price. Considering that the average jeonse (lump-sum rental deposit) ratio in Seoul is about 40%, if the presale price is less than 1.5 billion won, leasing without a loan may actually require a greater capital outlay. This is because the maximum loan limit for apartments priced below 1.5 billion won is 600 million won. On the other hand, if the presale price exceeds 1.5 billion won, the loan limit is reduced to 400 million won (and to 200 million won for prices over 2.5 billion won), so paying the full presale price without a loan and renting out the unit could be a more advantageous financial strategy.

Furthermore, most private presales use a long-term installment structure of down payment, interim payment, and balance, giving buyers two to three years to plan their finances between winning the subscription and moving in. In the current environment of tighter lending regulations, this subscription structure is being reevaluated as it reduces the capital burden on genuine buyers.

CEO Park stated, "The subscription system itself has not changed, but as the market evolves, the advantages of the system are being rediscovered. As long as presale price regulations and rising sale prices coincide, the popularity of Seoul's subscription market will continue."