Move Into a Home in Goyang Changneung with 77 Million Won... Buy Equity in Installments Every 4 Years, Pay Rent Separately

LH to Offer First Equity-Accrual Units in December

A public-sale apartment program that allows buyers to move in after paying just 25% of the home price and purchase the remaining equity over 20 years will be offered for the first time in December in the Goyang Changneung district of Gyeonggi Province. Buyers could move in with 77 million won in cash if they use a loan, but every four years they will face another payment of tens of millions of won to buy additional equity, as well as monthly rent and loan interest.

On the 4th, the Ministry of Land, Infrastructure and Transport announced detailed implementation plans for equity-accrual and profit-sharing type 2 public-sale housing, both designed to reduce the upfront financial burden. Next month, Korea Land and Housing Corporation (LH) will first offer 284 of the 1,057 units in Block S-2 of Goyang Changneung as equity-accrual units.

Applicants must have a monthly household income of no more than 7.53 million won for a three-person household (or 15.07 million won for a dual-income household) and total assets of no more than 362 million won. The asset limit will be raised to 431 million won for households with two or more children.

Aerial rendering of Goyang Changneung. Ministry of Land, Infrastructure and Transport

Under the equity-accrual model, buyers pay just 25% of the home price upfront when they move in (10% as a contract deposit and 15% as a move-in payment). They then purchase the remaining 75% in five installments of 15% every four years over 20 years. For an apartment priced at 510 million won, the current average price of public-sale housing in the Seoul metropolitan area for a 55-square-meter unit, the initial 25% equity stake would cost 128 million won (the exact calculated amount is 127.5 million won). If buyers can borrow 40% of the initial equity payment, or 51 million won, through a dedicated loan that the government is considering introducing, the cash they need on hand would fall to about 77 million won (76.5 million won).

However, buyers must pay rent to LH on the remaining 75% stake they have yet to purchase with their own money. The government plans to revise regulations to raise the rent calculation benchmark from 80% to 90% of nearby jeonse market rates. Assuming nearby jeonse deposits are 400 million won, the initial rent for the unpurchased 75% stake would be 270 million won if paid entirely as a deposit. If buyers pay no deposit and convert the full amount to monthly rent, they would owe 790,000 won per month. The ministry calculated that, based on the same jeonse deposit of 400 million won, a standard monthly rental would cost about 1.24 million won per month with a 130 million won deposit. That is about 450,000 won less per month than a standard monthly rental, but buyers who take out a dedicated loan to finance the initial equity payment must pay loan interest in addition to rent.

When buyers purchase an additional 15% stake every four years, they must pay the original sale price for that portion plus interest accrued over the intervening period. For an apartment priced at 510 million won, that means paying the principal of 76.5 million won plus interest every four years. The government plans to allow buyers to defer an equity purchase by up to one year. If they resell the home to LH during the resale restriction period, the government plans to revise regulations so that the lower of two amounts will apply.

The resale restriction period is 10 years from the announcement of the winners, and the owner-occupancy requirement is five years from the first date the home is available for occupancy. If buyers still cannot pay after deferring an equity purchase by one year, the process will depend on whether the resale restriction period is still in effect. During the 10-year resale restriction period, the home can be resold only to LH (public buyback). The resale price will be set at the lower of the equity acquisition costs paid to date plus interest, or the appraised value. After 10 years, buyers may sell the home to a third party, but if LH still owns a stake, they must negotiate the price with LH and obtain its consent to sell the entire home. LH will also have the right of first refusal to buy the home.

The government also unveiled a profit-sharing type 2 model. Buyers under this model must borrow 70% of the sale price, up to a maximum of 500 million won, from the National Housing and Urban Fund. For an apartment priced at 510 million won, they would borrow 357 million won and pay the remaining 153 million won with their own money. The loan interest rate will be 1 percentage point below the standard rate for the Didimdol loan at the time the loan is issued. Meeting preferential eligibility conditions will lower the rate by up to another 0.5 percentage point. However, no matter how low the rate falls, it will not go below the minimum rate for policy loans from the fund at the time the loan agreement is signed, currently 1.2% per year.

In return, when buyers later sell the home or repay the loan in full, they must share the increase in the home’s value with the fund. Under the existing public-sale “sharing” model, homes could be resold only to LH, and the capital gain was calculated using an appraised value below the market price (about 90% of the market price), with buyers receiving only 70% of the gain. By contrast, under profit-sharing type 2, buyers may sell freely on the general real estate market once they have met the five-year resale restriction and the owner-occupancy requirement of either three or five years. The increase in the home’s value will be shared in proportion to the average outstanding loan balance over the loan period. If buyers borrow 70% of the sale price, the sooner they repay the loan, the higher their share of the capital gain, rising from 30% to as much as 89.5%. The smaller the average outstanding loan balance, the larger the buyer’s share. Buyers can also end their profit-sharing obligation without selling the home by repaying the loan in full before maturity and settling the increase in the home’s value with the fund at that time.

Profit-sharing type 2 will not be offered this year because the Special Act on Public Housing must first be amended. The government plans to submit an amendment bill before the end of the year and begin offering the program after the law takes effect. Kim Yi-tak, the ministry’s first vice minister, said, "This will be an effective way to help people who have found home prices burdensome buy a home of their own."

This content was produced with the assistance of AI translation services.