Gyeonggi Province will supply "equity accumulation dwellings," in which buyers first pay only 25% of the sale price and then pay the remainder over 20 to 30 years, in Gwanggyo, Suwon within the year. The buyer first acquires 25% equity in the dwelling, and then purchases the remaining 75% held by the Gyeonggi Housing & Urban Development Corporation (GH) in five-year increments. Because it lowers the initial burden for young people and newlyweds who lack a large lump sum, it is called "savings dwellings."
Gyeonggi Province and GH are also preparing a dedicated loan product with Woori Bank, taking into account the characteristics of equity accumulation dwellings, for which it is hard to obtain a general mortgage loan. A plan to lend up to 40% of the sale price is under review. However, there are also notes that, because a usage fee must be paid for the equity held by GH, it remains to be seen how much the burden will decrease over the long term compared with existing mortgage loans.
According to the construction industry on the 11th, GH plans to supply 240 out of 600 apartment units to be built in Gwanggyo A17 Block, around 633, Woncheon-dong, Yeongtong-gu, Suwon, as equity accumulation units. The supply size is for exclusive areas of 60 square meters or less, and the sale price has not yet been set.
Gyeonggi Province planned to issue a notice recruiting occupants in Oct., but the project schedule has been somewhat delayed. A Gyeonggi Province official said, "We are adjusting the detailed schedule, but we plan to issue the recruitment notice within the year and begin sales."
Equity accumulation dwellings are a public sale model in which the occupant acquires only part of the dwelling's equity at the time of sale and GH holds the remainder. In Gwanggyo A17 Block, the occupant first pays 25% of the sale price and acquires equity in the dwelling. After that, over 20 to 30 years, the occupant purchases, in five-year increments, the remaining 75% equity held by GH. Once all equity is acquired, the occupant secures full ownership of the dwelling.
In exchange for a reduced initial sales payment, the occupant must pay a usage fee for the equity held by GH. As additional equity is acquired, GH's equity share and the usage fee burden decrease. The mandatory residence period is five years, and the resale restriction period is 10 years. When the resale restriction ends, the unit can be sold to a third party; however, if it is sold before all equity is acquired, any capital gains must be shared with GH according to the equity held.
GH and Woori Bank are also preparing a dedicated loan product to support occupants' initial equity acquisitions. Because equity accumulation dwellings involve GH and the occupant jointly holding the dwelling's equity, it is difficult to use a general mortgage loan that establishes a senior mortgage over the entire dwelling.
To solve this, the two institutions are reviewing a financial structure in which, instead of the dwelling, the occupant assigns to the bank the right to claim a refund of equity acquisition payments remitted to GH. If the occupant fails to repay the loan and the sales contract is terminated, the bank loan is repaid first from the equity acquisition payments GH returns, and the remainder is paid to the occupant. A loan limit of up to 40% of the sale price is under review, and the interest rate has not yet been set.
Experts say it could lower the barriers to homeownership at a time when the gap between housing prices and young people's incomes has widened. Kim Jin-yu, a professor in the Department of Urban Transportation Engineering at Kyonggi University, said, "If the public sector holds equity in dwellings and transfers ownership step by step, the initial capital burden can be reduced," and added, "We need to provide a variety of opportunities for young people to build assets."
There is also dissent. When the usage fee for public equity and the expense of acquiring additional equity are combined, the burden may not differ much from buying a home using existing loans. Yoo Seon-jong, a professor in the Department of Real Estate at Konkuk University, said, "From the occupant's standpoint, the usage fee paid on the equity held by the public sector is a burden similar to loan interest," and added, "If mortgage loan regulations are eased, home purchases can be supported without creating such a complicated structure."