As lending curbs tighten, some among the reserved units in newly built apartments in Seoul are being put up for sale at a discount. Reserved units are dwellings that reconstruction and redevelopment associations hold back from sale to prepare for contingencies.
Until now, reserved units have been popular because anyone could bid regardless of how many dwellings they owned and they could be purchased below market price. But recently, sale prices for reserved units have neared market levels, and with tighter lending regulations adding the burden of having to raise hundreds of millions of won in a short period, associations are finding it hard to sell their reserved units.
According to the maintenance industry on the 23rd, the redevelopment association for the Susaek 7 urban renewal acceleration zone in Susaek-dong, Eunpyeong-gu, Seoul, announced on the 18th that it would sell reserved units of 84 square meters and 59 square meters at DMC Art Fore Xi for 1.23 billion won and 1.035 billion won, respectively.
The association attempted to sell the reserved units once at the end of last month. At the time, the asking prices were 1.25 billion won and 1.05 billion won, respectively. In just three weeks, the association is trying again, lowering the prices for the reserved units by 20 million won and 15 million won.
Lately, cases like DMC Art Fore Xi that cut prices or ease sale conditions for reserved units have been emerging one after another. The "International Building Surroundings Zone 5 Urban Maintenance Type Redevelopment Project Association" in 210-1, Hangang-ro 2-ga, Yongsan-gu, Seoul, shifted from a highest-bid sale method to a first-come, first-served sale for its second attempt to sell reserved units, including an 84-square-meter type B apartment on the 20th floor of Hoban Summit Edition and a 42-square-meter type A officetel on the 12th floor.
Associations are discounting apartment holdings or easing sale terms because tighter lending regulations have made it harder to sell reserved units. Typically, buyers of reserved units must pay the balance within one to two months after the down payment, creating a burden to raise funds quickly. Under the government's "June 27 household debt management reinforcement plan," buying a reserved unit with a loan imposes an owner-occupancy requirement. In effect, gap investing (buying with a jeonse tenant) is being blocked.
Another reason demand has cooled is that prices for reserved units have recently approached market levels. In the past, reserved units came to market below actual transaction prices, but lately associations, seeking to cover sharply higher construction costs, have been trying to sell at prices similar to market levels. With few choices of building and unit numbers for reserved units and little advantage left on price, buyers appear to be turning away.
Ham Young-jin, head of Woori Bank Real Estate Research Lab, said, "Recently, the reserved units coming to market are from prime maintenance project complexes," and noted, "Bid prices have become too expensive, and the burden of having to prepare the full purchase amount at once is considerable."