New way for young to buy apartments sparks interest

Economy

Published: 05 Aug. 2020, 17:27 Updated: 05 Aug. 2020, 18:45

New way for young to buy apartments sparks interest

Acting Seoul Mayor Seo Jeong-hyup, center, with Land Minister Kim Hyun-mee, left, and Finance Minister Hong Nam-ki announcing the 23rd government real estate measures at the government's complex in central Seoul on Tuesday. [YONHAP]

The central government and Seoul city government’s new idea for helping some people become homeowners is sparking interest — and lots of questions about its practicality.

Among the real estate measures announced by the government on Tuesday was an apartment purchasing scheme for low-income households, newlyweds and people in their 30s and 40s. It would allow them to buy residences in Seoul with a 20 to 40 percent payment and the rest paid off over 20 to 30 years.

If an apartment is bought for, say, 500 million won ($421,000), the buyer will be allowed to put down 100 to 200 million won and pay the balance over 20 years.

For apartments bought for 900 million won or more, payments can go for 30 years.

Beyond the initial payment, payments can be every two or four years.

Technically, the buyer will own part of the property during the 20 to 30 years, and the rest will be owned by the state-owned Korea Land & Housing or the Seoul government-owned Seoul Housing & Communities. The buyer will have to pay rent to that government entity for the part of the residence not fully owned. The rent will diminish as the buyer owns more of the property.

Renters in some units can buy into the scheme after living in them for a minimum of eight years.

Residences in the program, which will be 70 percent of the apartments the central government will be building on its own land in Seoul, will be offered to newlyweds and people purchasing an apartment for the first time.

Forty percent of the 70 percent will be offered to newlyweds, defined as couples married less than seven years with children that are six or younger.

The family's income has to be below 130 percent of the average Seoul worker’s monthly income. That bar is raised to 140 percent for double-income couples.

For first-time buyers, which will be eligible for 30 percent of the residences, the income qualifications are the same.

Other conditions to be eligible to buy an apartment is that the applicant can't own an apartment or other real estate worth more than 215.5 million won, and any car owned can't be worth more than 27.64 million won.

People who take advantage of this new scheme, however, will be restricted from selling the apartment.

While the central government is looking at banning sales for 20 years, the Seoul city government is proposing a 10-year prohibition.

The government said more details will be announced later this year.

The Seoul city government is planning to offer 17,000 units by 2028.

“We have tried to create a practical solution for people in their 30s and 40s to buy their own homes, who have constantly been discouraged [because of the financial burden],” said acting Seoul Mayor Seo Jeong-hyup on Tuesday.

However, some analysts questioned whether people — especially young couples — are willing to live in the same apartment for as long as two decades.

“Usually people try to move to a larger apartment when their family grows and children become older,” said Shim Gyo-eon, a real estate professor at Konkuk University. “The apartments that most newlyweds start off in are small and it is questionable if they will be willing to live in the same sized apartment for 20 years.”

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]