Deals to perk up apartment sales

Homebuilders are offering a series of financial perks to boost the apartment presales market, which is suffering from an oversupply of units and tighter government regulations on home mortgage loans.

Buyers are being teased with lower prices, financial deals and other promotions.

Dongtan New City in Hwaseong, Gyeonggi, enjoyed a hot housing market earlier this year but recently recorded a shortfall in contracts in its first round of sales. Shinanensvil Riviera 3 Cha and 4 Cha apartments - cha is a way of numbering apartment complexes in Korea - opened 979 new apartments, though only 106 were sold. Hyundai Engineering and Construction also opened presales for Hillstate Unjung in Unjung New City of Paju, Gyeonggi. However, it was not a sell-out, as demand was lower than supply for all 10 models that were offered in the three rounds of sales. Because of the lack of interest, homebuilders lowered prices and introduced a variety of perks.

Hyundai Development Company (HDC) lowered the average price of Ilsan Central I’Park located in Goyang, Gyeonggi, from the original 12.5 million won ($10,600) per 3.3 square meters (35.5 square feet) to 11.83 million won. The price is about 2 million won cheaper than homes traded in June in nearby Ilsan New City. “In the midst of the cooling property market, we figured an early sell-out is critical and lowered the price” Um Tae-yoon, a presales chief at HDC, said.

GS Engineering & Construction (GS E&C) and Shindongah Construction offered fixed deposits for presales of Dongtan Xi Familier apartments in Hwaseong, Dongtan 2 New City. While the total down payment is usually 10 percent of a unit’s total sale price, customers can pay 10 million won as a fixed deposit under new conditions. The remainder can be paid a month later after the deal is confirmed. Interest payment on the contractor’s middle payment, which is 60 percent of the sales price, could also be delayed until the final payment is made.

“The supply of new homes has been mounting, and the situation is forecast to get worse,” Kim Dong-su, an executive director at the Korea Housing Association, said. “We see it’s better to offload housing inventories than to carry them.”

Samsung C&T compromised by lowering unit sale prices in the Raemian Roy Park apartment complex near Isu Station in Sadang-dong, southern Seoul, to 20.7 million won per 3.3 square meters, despite initial suggestions by the housing union to charge more than 22 million won.

E-Pyeonhansesang Yongin Hansoop City in Cheoin District, Yongin, operated by Daelim Industrial, offered the same discounts. The company initially set the unit price at 8.5 million won per 3.3 square meters. However, it eventually lowered the price to 7.99 million won. Compared to nearby Dongtan 2 New City, the price is about 3 million won less per 3.3 square meters.

“Our products hold high competitiveness, and the size of our offer amounts to 6,800 housing units, which is about the size of a mini new city,” Yang Byung-cheon from Daelim said, “but there is nothing that attracts customers better than a lower price tag.”

Price cuts are a proven strategy to attract buyers. In the application session for the sales of Raemian Isu Station Roy Park, the competition increased to an average 14 to 1 to a peak of 65 to 1 for popular units. The application session is where a potential home buyer applies for the presale rights. Meanwhile, a total of 41,908 potential buyers swarmed for the presales at the Heliocity apartment complex in Songpa District, southeastern Seoul, while the available units were 1,216. The complex cut its price from 28 million won per 3.3 square meters to 26.26 million won.

Together with the price cuts, construction companies are also providing financial benefits to customers to ease their burden on payments. Promotions held by the companies include an interest-free middle payment, deferred total interest payment and a fixed charge for deposits at a lower fixed rate, compared to the usual down payment of 10 percent of the total sale price.

Raemian Mt. Bukhan Vera Hills in Nokbeon-dong, Eunpyeong District, northern Seoul, which is scheduled for sales soon, will ask for a 10 million won down payment, regardless of the size or type of apartment. The original amount of the deposit for an 84-square-meter unit would have been 50 million won, 10 percent of its total sales price. The middle payment will also be offered free of interest.

The Hoban Vertium apartment complex newly introduced by Hoban Construction in Pyeongtaek, Gyeonggi, is also accepting a fixed deposit payment of 10 million won and interest-free middle payment to attract customers.

Due to the lack of interest, companies are also postponing the release of projects.

GS E&C is delaying sale opening dates for three of its apartment complexes, including its Xi brand near Dongtan 2 New City. HDC, Lotte Engineering & Construction and Daelim are also postponing their scheduled sales to next year.

The downward trend in the property market is forecast to continue because of the unknown impact of the U.S. Federal Reserve’s impending rate hike and the Korean government’s stricter regulations on loans.

“Not only in the suburban areas around Seoul but also in downtown areas and hot selling areas, [companies] will soon adopt financial promotions for home buyers,” said Chung Yeon-shik, vice president of iNEX Housing, which specializes in marketing unconstructed apartment presales.

“Even if the sale prices are lowered, home buyers should compare prices with the overall market price,” Jules Kim, a real estate analyst at NH Investment & Securities, said, “and see if the financial promotion costs are passed on to the apartment sales price.”

BY HWANG EUI-YOUNG [kim.jeehee@joongang.co.kr]