Change streamlines pre-construction sale process

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Change streamlines pre-construction sale process

Minimum requirements to apply for a pre-construction apartment will be eased starting Friday.

Due to low interest rates, landlords have transferred their jeonse (two-year rent contract with lump-sum deposit) houses to monthly contracts for the past few years, which resulted in higher housing costs for many Koreans.

In an attempt to deal with the problem, the government last year introduced a set of deregulatory measures in the real estate market, which passed the National Assembly at the end of 2014.

As regional governments usually take as long as 10 days to review each builder’s customer recruiting notice, potential buyers will begin benefiting from the change in March.

According to the Ministry of Land, Infrastructure and Transport on Monday, the pre-construction apartment application screening system will be streamlined two groups - class 1 and class 2 applicants. Previously, there were three classes.

In Korea, homebuyers are required to have a designated savings account at commercial banks to apply for a pre-construction apartment. The longer the savings accounts have existed, the better chance the applicant had to buy an apartment.

From now on, people with deposits of a year or more will be ranked higher, and those with deposits of less than a year will be subject to a lottery.

The government also eliminated a rule that penalized owners of multiple homes when screening applications.

Real estate analysts say the revision is estimated to double the number of class 1 house applicants this year to 6 million.

Any household with at least one family member who doesn’t own a house can apply for a public housing. Before, only non-house owner household heads were eligible to apply.

Also, the demand by investors for pre-construction houses will rise, especially in areas where buyers already are paying a premium, added the analysts.

In Seoul and Gyeonggi, owners of pre-construction houses are required to hold their contracts for six months before they can sell them.

“House prices are expected to show only a limited increase due to continuing economic uncertainties,” said Park Won-gap, head researcher for real estate at KB Kookmin Bank. “So it is safe to buy pre-construction houses for the purpose of actually living in them [instead of as investments].”

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