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| A woman points to apartments seen from Lotte World Tower, Songpa District, Seoul, in this July 2022 file photo. Newsis |
By Lee Yeon-woo
Young people in Korea are either closing down or opting not to open a housing subscription savings account as the real estate market here continues to remain in the doldrums. Falling home prices and a low annual deposit interest rate are also cited as the reasons behind this trend.
A housing subscription savings account?enables an adult to become eligible to purchase a state-subsidized or private apartment after a raffle after making deposits for a given period. It has been considered as a must for those who wish to buy their own house.
"The account is kind of a white elephant for me. I'm holding it because I have poured a lot of money into it for about five years, but I feel very uncertain whether I can buy my house with that in the future," an office worker who asked to be identified only by her surname Jeong told The Korea Times.
"I watched some YouTube videos that recommended transferring the money to an installment savings account that guarantees more profits now. I'm seriously considering closing down the account," the 27-year-old said.
But according to data the Ministry of Land, Infrastructure and Transport submitted to Rep. Yang Kyung-sook of the main opposition Democratic Party, the number of people who hold the account stood at 27.74 million as of January, down by 860,000 from last June. The figure has constantly decreased for seven months. During November alone, 519,000 people closed their existing housing subscription savings accounts.
The total amount of deposits in the accounts also continued to fall. The total deposit as of January stood at 100.2 trillion won ($77.38 billion), down 4.9 percent from last July.
Experts point out that an increasing number of people who have a low chance of winning in the new apartment subscription competition ― mostly young people ― are transferring their money to other types of savings that guarantee high interest rates right away. When many people apply to buy an apartment, the person with the highest points ― which is calculated by diverse criteria such as the duration of time without a house, length of time since opening the account and how many people are in their family ― is given the right to purchase a new apartment. Young people are thus relatively disadvantaged.
"In the case of the so-called 'lotto apartments' whose prices are expected to soar, competition is too tough among potential buyers, so there is a slim chance of winning the raffle. In the case of other apartments, no one can be sure whether the value will go up after they purchase it. Eventually, they don't see why they need the housing subscription savings account and just use up the money," Kim In-man, the head of Kim In-man Real Estate and Economics Institute, explained.
However, Kim advises his clients to take a cautious approach when closing the account. "The market atmosphere can change. You don't cancel an insurance contract even though you don't need it now. Still, it's better to hold on to it."
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