Gov’t housing program proves to be a hit
The reason that GS E&C’s new complex has been getting so much attention is because it is part of New Stay, a housing program introduced by the government last year to tackle various housing problems in Korea including rising jeonse (lump-sum deposit rent contract) prices in the greater Seoul area.
New Stay apartments are built by private construction companies, but they must comply with government-mandated conditions for their tenants, such as allowing them to stay for a minimum of 10 years on one deposit and limiting monthly rent hikes to a maximum of 5 percent each year.
GS E&C is offering 483 units at its New Stay apartments, with sizes ranging from 96 square meters to 106 square meters. The deposit on the smallest unit is between 290 and 320 million won ($287 thousand), with monthly rent between 460,000 and 530,000 won.
“There is huge interest in New Stay because jeonse prices continue to go up and buying a home in times like this seems uncertain,” said Park Young-min, a 43-year-old resident of Geumcheon District in southwestern Seoul. “We won’t have to worry about moving [every two years, which is the minimum requirement for most jeonse contracts], and we can stay in one place for a very long time while paying monthly rent that is cheaper than [the average monthly] apartment management fee.”
In the past, long-term lease apartments provided by the government had the image of housing projects meant for low-income households. As a result, many neighborhoods protested against construction of such apartments out of concern that they might bring down property values.
And they are proving popular, with many complexes selling out their contracts during the pre-construction stage. The Ministry of Land, Infrastructure and Transport estimates that the number of households that will be accepted into New Stay from this month until the end of the year will number 11,364. That’s five times the 2,157 households that were accepted in the first half of the year.
One of the reasons for New Stay’s popularity is the lack of preconditions when applying for a rent contract. Applicants don’t need a housing subscription account (which is needed when applying for bids in other apartments). Neither income nor previous home ownership is considered.
“Out of the six New Stay complexes that accepted tenants, five were sold out,” said Kim Sang-mun, an official in charge of New Stay at the ministry. “This is an exceptional achievement considering that unlike the usual pre-construction sales stage, those signing up are people who are actually planning to live there.”
With housing prices failing to recover to the sharp growth rate enjoyed at their prime in the mid-2000s, many Koreans feel there is no need to actually own an apartment.
“Because there is no burden of acquisition taxes and personal wealth taxes, not only those who live on jeonse or monthly rent contracts but also homeowners are signing up [to rent out New Stay apartments],” a construction company official said.
New Stay apartments are also lucrative for major construction companies, especially with the number of large-scale housing developments in the local market shrinking and overseas orders drying up. Many companies have focused on upgrading the quality of New Stay apartments.
Lotte E&C included its car sharing program at its New Stay apartments, including at the Lotte Castle in Hwaseong. Residents can share the apartment complex’s vehicles and reserve them via smartphone.
At GS E&C’s Dongtan Lake Xi The Terrace, also in Hwaseong, the buildings are only four stories high, but each unit comes with a terrace.
Hanwha E&C’s New Stay in Suwon, Gyeonggi, not only has a child care center in its apartment complex but also has a screen golf center, health club and library.
“In the early stage of New Stay, the general perception was that the quality wasn’t on par with other apartments,” said Kang Yoon-seok, head of Lotte E&C’s lease apartment business team. “Today, even those in the middle- and upper-income level have taken interest as the qualities [of New Stay] don’t fall behind.”
Just a year ago, when the government first announced New Stay, there was skepticism in the market about whether it would succeed. But now, awareness of the program amounts to 49.4 percent, a sharp improvement from the 28.2 percent recorded last year, and 43.2 percent of people say they have favorable views of New Stay, up from 35.1 percent a year ago.
“Considering that only 30 percent are aware of government policies, 50 percent awareness is exceptional,” said Kim Sang-mun at the ministry.
Thanks to its growing popularity, the government is planning to secure land for the construction of 150,000 New Stay apartment units through next year. That’s 20,000 more units than its initial plan.
SK E&C in October will be taking preconstruction orders for rent contracts on 1,086 New Stay units in Hwaseong, while Hanwha E&C is planning 1,213 units in Incheon.
“New Stay in the future will likely contribute to stabilizing the jeonse and monthly rent market,” said Kim Gyu-jeong, a real estate expert at NH Investment and Securities.
“As the competition between construction companies on New Stay heats up, the design of apartments and services are evolving.
However, as convenience improves, it also means that [apartment] management and maintenance costs could go up, and since there are no limits to how much the initial rent prices could increase, it is wise to compare the rent [of New Stay apartments] with those of surrounding areas.”
In fact, even though the monthly rent at New Stay units is limited to a 5 percent annual hike, that rule only applies after the tenants move in, so future contracts could allow for higher rent hikes.
BY HWANG EUI-YOUNG, LEE HO-JEONG [firstname.lastname@example.org]
with the Korea JoongAng Daily
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