High sale prices and loan changes dim prospects for homeownership

Pre-sale subscribers for public housing in South Korea's Goyang Changneung new city are voicing strong objections to revised financial support and a substantial increase in estimated sale prices. The controversy centers on the S-3 block of public housing, an 'income-sharing' model where profits are shared between the homeowner and the Korea Land and Housing Corporation (LH) upon resale after a minimum five-year residency.

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Pre-sale subscribers will be provided with the dedicated mortgage loan as originally promised, without being subject to the Didimdol loan's income and housing price criteria, with a maximum limit of 500 million won (LTV 80%, DSR not applied).

Initially, LH advertised a dedicated mortgage loan for the project, offering a fixed interest rate between 1.9% and 3.0%, covering up to 80% of the home value (LTV 80%) for up to 40 years, with a maximum loan of 500 million won. However, the final announcement for the main sale replaced this with standard government-backed loans like 'Didimdol,' which have variable interest rates (1.8% to 4.5%), a lower LTV of 70%, a maximum loan of 400 million won, and stricter income and asset requirements. This change has led pre-sale subscribers to argue that they cannot afford the down payments without the promised dedicated mortgage.

In response to the outcry, the Ministry of Land, Infrastructure, and Transport issued a statement assuring that pre-sale subscribers would still receive the dedicated mortgage loan with the originally promised terms (up to 500 million won, LTV 80%, DSR not applied). However, the ministry clarified that the specific interest rate and maturity would be subject to the prevailing 'Didimdol' loan conditions at the time of application. This distinction leaves subscribers concerned about potentially higher interest rates and a reduced loan term compared to the initial advertisement.

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The sale price for the 84㎡ unit has increased by 154.2 million won, a rise of 27.9%, compared to the estimated pre-sale price.

Adding to the subscribers' financial strain, the sale price for the 84㎡ units has increased significantly from the estimated pre-sale price of 552.8 million won to 707 million won, a jump of 27.9%. This increase, attributed to rising construction costs from raw materials and labor, has made affording the homes considerably more challenging. Concerns are also mounting as public housing prices in the area approach those of private market sales, with a nearby apartment complex selling for 1.02 billion won for an 84㎡ unit. While the public housing price remains about 10-20% lower, the narrowing gap raises questions about the affordability benefits of public housing.

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The public housing sale price is nearing market prices, raising concerns.