Some buyers who won the right to purchase new homes in South Korea are giving up their contracts because they cannot secure financing, as mortgage rules tighten.
Winners Walk Away After Beating 32-to-1 Odds
Mokdong Yoonseul Xi, an officetel — a studio unit used as either a home or an office — in Seoul's Yangcheon District, drew odds of up to 32.09 to 1 in its recent application round but still has units left over, according to the Korea Real Estate Board's application portal on the 23rd. The leftover supply is attributed to winners who could not raise the money because of lending restrictions and walked away.
Withdrawals were concentrated in the higher-priced unit types. "Some gave up because they could not afford it, but we also found cases where multiple members of the same household applied and won, or where the assigned unit was not to their liking," a sales official told Newsis. "Only a few standard-sized units are left, and most of the remainder are expensive large duplex units. We expect a sellout by early October, after the Chuseok holiday."
The nationwide move-in rate for apartments stood at 59.5% in August, down 8.6 percentage points from 68.1% in July, according to the Korea Housing Industry Research Institute. The rate in the greater Seoul area fell 4.6 percentage points to 80.8% from 85.4%, while Seoul dropped 8.5 percentage points to 82% from 90.5%. Failure to secure a final-payment loan was the single largest reason for not moving in, cited in 37.2% of cases.
Analysts attribute the shift to tougher mortgage screening under the government's household debt controls, compounded by owner-occupancy requirements and tax changes that have made it harder to cover the balance by leasing the home out under jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent). In its Aug. 13 supply measures, the government said it would manage interim and final-payment loans for newly built apartments separately from its household debt volume target.
Units Near 3 Billion Won Undersubscribed as Buyers Flock to 800 Million Won Range
As financing pressure builds, demand is tilting toward relatively cheaper complexes rather than those with high presale prices. At The Sharp Bundang Highest, near Jeongja Station in Bundang, Seongnam, Gyeonggi Province, applications for some 84-square-meter unit types — the size most sought after by Korean buyers — fell short of the number of units offered in the special supply round.
The 66-square-meter Type A drew 5.33 applications per unit, while Types B and F of the 84-square-meter units received fewer applications than units available. The 84-square-meter units at the complex are priced at up to 2.981 billion won. By contrast, the 66-square-meter units are priced at 2.163 billion won and the 74-square-meter units at 2.352 billion to 2.402 billion won. Interest appears to have concentrated on the types carrying a lighter price burden.
Brownstone Wolgok Central in Hawolgok-dong, Seongbuk District, Seoul, where prices are a comparatively modest 800 million won range, drew an average of 61.92 applications per unit in its first-priority round on the 9th.
The number of people keeping a housing subscription savings account is also falling. As of July this year, account holders totaled 25.77 million, down 2.82 million from four years earlier, with cancellations from January through July amounting to 8.2 trillion won.
