Ministry of Land announces LH's purchase of 3,000 unsold homes in local areas
The Ministry of Land, Infrastructure and Transport announced plans for LH to purchase 3,000 unsold homes to supply them as 'conversion type Guaranteed Lease' to revive the local construction industry.
This measure is being pursued as a policy to respond to the continued stagnation in the real estate market and the increase in unsold homes.
Announcement of purchase for unsold homes post-completion... Applications accepted starting March 21
The Ministry of Land, Infrastructure and Transport announced that LH will begin the announcement for the purchase of 3,000 unsold apartments in local areas starting March 21. Applications will be accepted from April 1. The purchase target is for unsold apartments completed in local areas excluding the metropolitan area, and only houses for which the resident recruitment announcement has been completed can be applied for.
The purchase decision will be evaluated based on the future utilization as rental housing and the potential for conversion to sale. This is expected to invigorate the local construction industry and improve the supply imbalance in the housing market.
Purchase method: Introduction of 'reverse auction' method
Recently, LH has decided to adopt a 'reverse auction' method in housing purchases, prioritizing the purchase of the house that offers the lowest selling price.
The purchase limit price will be determined through appraisal, set at around 83% of the appraised value. However, some differential application may be made considering the unsold period of each complex or the characteristics of the housing.
This measure is interpreted as a way to solve the unsold problem caused by excessively high sale prices by construction companies and to encourage more realistic price adjustments that reflect actual transaction prices.
Supply as 'conversion type Guaranteed Lease'
The homes purchased by LH will be provided at a lease price equivalent to 90% of the market price. Residents can stay for up to 6 years and, if desired, transition to ownership at a lower price.
The residency period is guaranteed for up to 8 years, and if the resident does not wish to transition to ownership, the lease can be extended for an additional 2 years. This policy is considered to alleviate the burden on actual home seekers while providing long-term opportunities for home ownership.
Detailed information related to this housing purchase will be available on the LH Subscription Plus website (https://apply.lh.or.kr) from March 21.
📌 Key Q&A
1. Why is LH directly purchasing unsold homes after completion?
Due to the recent slowdown in the construction industry and rising construction costs, the number of unsold homes after completion is increasing. This raises the risk of chain bankruptcies within the construction sector.
As of December 2024, the number of unsold homes exceeds 20,000, and particularly, the increase in the local areas (17,000 homes) is more pronounced compared to the metropolitan area (4,000 homes).
To address this situation, there is a call for LH to directly purchase unsold homes to utilize them as public rental housing or conversion type housing.
2. What is the scale and target area for the purchase?
There are plans to purchase a total of 3,000 homes across local areas outside the metropolitan area.
The purchase volume has been determined based on the unsold status and previous purchase cases.
3. What criteria will be used to select the homes for purchase?
We will proceed with the purchase only for unsold apartments (50-85m²) that have been completed after the resident recruitment announcement is made.
In order to resolve the vacancy issues in LH rental housing, we plan to primarily evaluate the potential for use as 'conversion type Guaranteed Lease'.
The direction will be to purchase houses that are favorable for rental and conversion to sale.
4. How will the purchase price be determined?
It is important to set the purchase limit price based on the selling price expectations.
The purchase limit price will be set at 83% of the appraised value.
The reverse auction method will be applied, prioritizing the purchase of homes with the lowest selling price compared to this purchase limit price.
Moreover, there is a need to reflect actual transaction prices through appraisals to address the issue of excessively high sale prices by construction companies.
5. What are past cases of unsold home purchases (2008-2010)?
To prevent moral hazard, LH purchased a total of 7,058 homes at prices lower than market rates. Among these, 1,117 homes under 60㎡ were provided as national rental housing, while 5,941 homes over 60㎡ were provided as conversion-based rental housing.
This LH's purchase of unsold homes in the local areas represents a policy that has complex goals beyond mere housing purchases, aiming to expand the supply of public housing, stabilize the housing market, and invigorate the construction industry. It is now a crucial time to closely examine the future trends of the housing market and the actual effects of this measure.
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