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`Sweet Home` Program to Shake Up Real Estate Market

Posted August. 29, 2009 07:57,   


○ Builders vs. consumers

In the wake of the government plan to provide lots of homes for low-income families in the Seoul metropolitan area, construction companies are jittery after having had high expectations of a sales rebound in fall.

With potential homebuyers drawn to housing units to be provided under the government’s “sweet home” project, they are likely to delay applying to buy more expensive houses made by private builders.

Many homes including those in Yeongjong Sky City of Incheon, Byeolnae Zone of Namyangju, Gyeonggi Province, and Samsong Zone of Goyang, Gyeonggi Province, are expected to be put on the market in October. These regions will likely be affected by the government’s plan to sell relatively cheaper homes.

The number of unsold apartments has slightly decreased but is feared to soar again. A source at a construction company said, “Private builders are discouraged since they are at a disadvantage in price competitiveness. They will begin selling their apartments earlier than expected or postpone their plan to avoid selling apartments when sweet homes are put on the market.”

Koreans who do not own homes, however, hope to buy a house at half the market price. The government plans to provide an additional 200,000 units across the Seoul metropolitan area and give preferential treatment to newlyweds, households with several children, and youths who newly join the workforce.

Workers in their 30s have especially high expectations for the sweet home project. One man who will marry in December said, “Sweet homes are technically the only chance for youths to buy their own homes in Seoul. The competition will be intense, but I’ll apply for the program.”

○ Installment savings vs. housing subscription accounts

Experts predict that the demand for housing subscription accounts will surge due to the government’s release of its housing market policies Thursday. Subscribers to housing installment savings accounts have complained, however, since they are ineligible for sweet homes.

One man who invested money in the housing installment savings account said he is angry with the government’s exclusion of subscribers to housing installment savings accounts from the sweet home program.

“It’s incomprehensible that the government is not giving a chance to subscribers to housing installment savings accounts who do not own homes. A certain portion of sweet homes should be allotted for them,” he said.

Housing subscription subscribers will see no grave changes but a large number of subscribers to housing installment savings accounts are expected to cancel them and open housing subscription accounts.

Kim Hee-seok of online information provider Real Estate 114 said, “It’s not right to pay all attention to sweet homes due to intense competition. Potential homebuyers will have no choice but to buy homes from private builders if their bid to get sweet homes fails. Instead of rushing to cancel their housing installment savings accounts, they should take a thorough look at the government’s supply plan and carefully make a decision.”

○ Central vs. provincial governments

Experts warn that the sweet home project could fail. Provincial governments have also strongly opposed the project, which was proposed by the Land, Transport and Maritime Affairs Ministry.

Provincial areas where sweet homes will be built including Gyeonggi Province and the suburbs of Goyang and Hanam complain that the ministry unilaterally announced its plan. They also say the plan fails to reflect the unique features of each region.

Certain regions also seem disgruntled over their regions having to embrace rental homes for low-income families.

Experts say sweet homes could be in short supply between 2013 and 2018 if they are supplied before 2012. Yet the government plans to provide 150,000 units per year from this year to 2012 and reduce their number to 66,000 units from 2013.

A ministry source said, “When new cities were built in Seongnam’s Bundang district and Goyang’s Ilsan district, the housing market stabilized after two million units were supplied simultaneously. Similar results will emerge if lots of sweet homes are provided through 2012.”

leon@donga.com baltika7@donga.com