in the past year, more than half a million people have canceled their subscription boxes. With higher prices and lower odds of winning, many people don't feel the need to keep a subscription box, but experts say that even if your odds of winning are low right now, keeping a subscription box can be beneficial in the long run. if you're thinking about closing your subscription box, here's what you need to know.
table of contents
- why the number of subscription box cancellations is soaring
- five reasons to keep your subscription box
- tips for using a subscription box
- frequently asked questions
why is the number of subscription box cancelations skyrocketing?
500,000 people canceled in a year
according to data from Korea Real Estate Agency's Subscription Home, the number of subscription passbook subscribers has decreased by 505,343 from July last year. As it is difficult to win a subscription passbook even if you get a perfect score in both the no-housing period and the subscription period based on a household of four, many people, especially one- to two-person households, decide to cancel their subscription passbook because the realistic chance of winning is very low.
rising home prices are the most common reason
the most common reason for canceling a subscription account is steeply rising real estate prices. according to statistics from the Housing and Urban Guarantee Corporation, the average sales price of a private apartment in Seoul hit KRW 4.543 million per square meter in July of this year, compared to KRW 2.681 million in July 2020, nearly doubling in five years. in the metropolitan area, the price rose by more than 60 percent, from 18.6 million won to 29.07 million won over the same period. With the down payment becoming a burden even for winners, there is a growing perception that subscription is no longer an affordable means of home ownership.
lending restrictions put a strain on funds
the government's 6-27 real estate measures, which capped mortgage loans in the Seoul metropolitan area at KRW 600 million, further bolstered the argument that subscription passbooks are useless. with the average price of an apartment in Seoul reaching KRW 1.687 billion for an exclusive 84-square-meter unit and KRW 1.234 billion for an exclusive 59-square-meter unit, even with the maximum loan, you'll need at least KRW 600 million in cash.
5 reasons why you should still keep your savings account
1. savings account rates are higher than deposits
the biggest reason experts recommend keeping a savings account is the interest rate. compared to regular bank deposits or savings, savings accounts offer similar or higher interest rates, which can help you build wealth. Last year, the Ministry of Land, Infrastructure, and Transport raised the savings account interest rate from 2.0 to 2.8 percent per annum to 2.3 to 3.1 percent per annum.
the government raised the interest rate by 0.3 percentage points in November 2022, 0.7 percentage points in August 2023, and 0.3 percentage points in 2024, for a total of 1.3 percentage points in two years. The Youth Housing Dream savings account, which is open to young adults between the ages of 19 and 34, offers a rate of 4.5 percent per annum, which is significantly higher than other financial products.
2. the importance of the savings account enrollment period
if you're planning to apply for a home of your own, you can't ignore the enrollment period. The winner is selected from among the top applicants based on points, which are composed of 32 points for housing tenure, 35 points for the number of dependents, and 17 points for the enrollment period.
the easiest of these to fulfill is the membership longevity point. you only need to stay a member for 15 years or more to earn the maximum 17 points. since the largest portion of the private subscription volume is for the value-added system, it is advantageous to stay enrolled as long as possible to fulfill your enrollment period.
3. government benefits continue to grow
it's also worth noting that the government continues to expand the benefits of the subscription account. even if you don't win the subscription, you can still use it for tax deductions, and as of last year, the year-end tax deduction benefit limit was increased to KRW 3 million.
the period for minors to make payments has also been extended to five years from two years, and a new Youth Housing Dream Loan has been launched that allows young adults and newlyweds to borrow 300 million to 400 million won at low interest rates if they win the offer. since it's hard to predict how the benefits will change in the future, it may be beneficial in the long run to keep the program rather than canceling it if you don't win right away.
4. understand the difference between public and private subscription
many people feel overwhelmed by the increase to 250,000 won, but knowing the difference between public and private subsidized housing can help you strategize your contributions.
for public subscription, winners are selected based on the number of months without housing, the number of payments, and the total amount of payments, so it's best to maximize the amount as much as possible, while private subscription is ranked by region and size. while you must meet the deposit threshold, the number of payments doesn't really matter, so you don't have to pay 250,000 won every month - you can adjust the amount of your savings account payments to meet your savings goals.
5. use a subscription box loan for emergencies
if you're in a hurry and considering closing your savings account, consider a savings account security loan. You can borrow up to 95 percent of your deposit, and the interest rate is around 2 percent per year, which is lower than other loan products. it's a great way to get the funding you need while still keeping your subscription box.
tips for using a savings account
to use a savings account effectively, you need a strategy that fits your situation. if you're a young adult, consider signing up for the Youth Housing Dream Savings Account, which has a higher interest rate. don't forget to take advantage of the tax credit at tax time.
as you build up your savings over the long term, it's a good idea to keep an eye on the housing market and government policy changes. Even if it seems hard to win now, market conditions and policies are constantly changing, so your opportunity could come at any time.
common questions
Q1. Are savings account rates really higher than deposit rates?
A. Yes, the interest rates are higher than many savings products, ranging from 2.3 to 3.1 percent per annum for regular savings accounts and 4.5 percent per annum for the Youth Housing Dream savings account, making it a very favorable financial product, especially for young people.
Q2. Is it impossible to win if the subscription period is short?
A. It's not impossible to win a savings account with a short enrollment period, but you may be at a disadvantage in the points system, so you may want to look for lotteries or special offers. in the long run, it's more beneficial to stack up your subscription period.
Q3. I can't afford to pay 250,000 won per month, what should I do?
A. If you're aiming for a private sale, you don't need to pay the full 250,000 won every month. You only need to meet the deposit threshold for each region, so you can adjust by paying more when you can afford it.
Q4. What happens to the subscription period value if I cancel my subscription?
A. If you close your savings account, you'll lose all the loyalty points you've accumulated. if you decide to rejoin later, you'll have to start fresh, so you should make this decision carefully.
Q5. Can anyone get a subscription box mortgage?
A. Most subscribers who have funds in their subscription box are eligible. you can borrow up to 95 percent of your deposit, but each bank may have slightly different terms and conditions, so check with your financial institution.
the bottom line
even if winning an apartment offer seems like a shot in the dark, it's still a smart idea to keep your savings account, as you can build equity with higher interest rates, accumulate loyalty points, and take advantage of a variety of government benefits. The market and policies are constantly changing, so keep your savings account open so that when the time comes, you'll be ready to take on the challenge.
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