Crowding Into the Application Market

Applications for the housing-commercial apartment complex in Seoul areas and apartment for installment sale are flowing into one place while the price of apartment in Seoul remains hesitant. It seems that undecided funds for proper investment are getting together here and there when the situation of Kangnam areas is diminished due to the possible introduction of public land ownership system and the government notice of strong real estate policy.

It looks like that the fluctuating funds are playing hide and seek with the government. Experts are warning not to be dazzled by this kind of investment behavior. They are pointing out that unreasonable investment can lead to a blunder at the slightest slip in this situation where the government has a strong will to stabilized housing prices.

63.4 to 1 for housing-commercial apartment complex in Guro-dong, Guro-gu Seoul, which Namgwang Construction Company sold in lots on October 15. And 9,092 people rushed into applying for “Ssangyong Platinum” apartment of 219 households.

The average rate of application competition for the apartment of 155 households is 55 to 1, and office building for housing (64 rooms) is 10 to 1. Especially, the 38 pyong apartment of 25 households showed a high competition rate of 63.4 to 1 with 1,500 applicants.

Recently in the case of “Taeyoung Dessiang Second” distributed in Poongdukchon-dong Sooji-eup, Yongin City, Kyeongki province, the first rank has shown the competition rate of 1.4 to 1 and all the applications for 249 households were completed.

Compared to the first half of the year when the insufficiency of the application could be exempted at the third rank, it shows a different atmosphere as if separated by age.

The heated atmosphere of the application in the provincial real estate markets in Cheonan of south Chungchung province and Busan is becoming red-hot.

The installment sale of Doosan We’ve (425 households) of 34 pyong that Doosan Construction & Engineering recently distributed was completed with the competition rate of 3.95 to 1 at first rank and 24 pyong apartment also made a record of 145 to 1 at the second rank.

At “LG Hanbat Xi” modeling house which recently opened in Daejeon, around 2,000 investors crowded in the confusion during weekdays.

The application competition rate of simultaneous installment sales in Seoul has been showing the consecutive upward tendency. The first rank of competition rate of the sixth simultaneous installment sales was 5.7 to 1, the seventh 8.8 to 1, the eighth 13.5 to 1, and the ninth 20.0 to 1.

Why a high application rate? According to the analysis of the real estate industry, the speculation apartment boom has never been on the ebb. Actually, since the decline in investment in Gang-nam region in Seoul after the announcement of possible restrictions on possession and deals of real estate, speculation money flowed to the local apartments and the dwelling-store complex buildings.

Especially, investors are taking advantage of the availability of monopoly of subdivision in terms of the dwelling-store complex building with less than 300 households and the region where it was not appointed as over speculation zone.

One of the reasons is the marketing strategy of construction companies, which offers various financial benefits such as future interest payment and no interest on money before full payment through selecting the most beneficial and attracting site.

However, the real estate experts pointed out the risk of investment against the governmental regulation which is on the way of revising some measurement in order to stabilize increasing real estate price.

“According to each index of the real estate market, there are clear signs of freeze in the real estate market,” said Gwak Chang-seok, the executive of Doctor Apartment. He also added, "Investing with borrowed money could bring big disaster because the dwelling store complex building confronts the biggest decrease in its asset when the real estate market goes into recession.”

Jae-Seong Hwang Chang-Won Kim jsonhng@donga.com changkim@donga.com